The Reason a Non-Discriminating Monopolist Chooses to Produce Where P

question 111

Multiple Choice

The reason a non-discriminating monopolist chooses to produce where P > MC rather than P = MC,and therefore causes a deadweight loss,is that he

• A) ensures himself of a profit at P > MC.
• B) does not value the sales that do not occur.
• C) will not maximize profit at P = MC.
• D) prefers to charge a higher price.
• E) will experience a loss at P = MC.

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Definitions:

Unit Selling Price

The amount of money charged for one unit of a product or service.

Unit Variable Cost

The cost associated with producing one additional unit of a product, which can vary with the level of production output.

Fixed Costs

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

Break-even Point

The production level or sales volume at which total revenues equal total expenses, resulting in no profit or loss.