The Deadweight Loss Associated with a Monopoly Occurs Because the Monopolist

question 9

Multiple Choice

The deadweight loss associated with a monopoly occurs because the monopolist

• A)maximizes profits.
• B)produces an output level less than the socially optimal level.
• C)produces an output level greater than the socially optimal level.
• D)equates marginal revenue with marginal cost.

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Definitions:

Variable Cost Ratio

The proportion of variable costs to total sales, indicating how variable costs change with sales levels.

Bond Issue

The process by which a borrower issues bonds to raise funds from investors willing to lend them money for a certain period.

Operating Leverage (DOL)

Operating leverage measures how revenue growth translates into growth in operating income. It is a measure of how sensitive the operating income is to the change in revenues.

Fixed Costs

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