Deadweight Loss Results in a Monopoly Because

question 179

Multiple Choice

Deadweight loss results in a monopoly because:

• A) the monopolist charges a price equal to marginal cost, which is higher than the price charged in a competitive market.
• B) the monopolist produces a quantity that is higher than the quantity produced in a competitive market.
• C) the monopolist makes a positive economic profit in the short run.
• D) the monopolist charges a price below marginal cost.
• E) some consumers who would benefit from a competitive market lose out.

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Definitions:

Joint Products

Products that are generated together from the same raw materials or production process, where the costs are difficult to allocate to each product individually.

Split-off Point

marks the stage in a production process where multiple products are generated from common inputs, necessitating allocation of costs among the products.

Avoidable Cost

A cost that can be eliminated (in whole or in part) by choosing one alternative over another in a decision. This term is synonymous with relevant cost and differential cost.

Fixed Costs

Expenses that do not change with the level of production or sales activity, such as rent or salaries.