Consider a Profit-Maximizing Monopoly Pricing Under the Following Conditions

question 309

Multiple Choice

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing quantity is 40 units, the profit-maximizing price is $160, and the marginal cost of the 40th unit is $120. If the good were produced in a perfectly competitive market, the equilibrium quantity would be 50, and the equilibrium price would be $150. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?

• A)$40
• B)$100
• C)$200
• D)$400

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Definitions:

Custom-Made Goods

Products that are specially designed and manufactured according to the specifications and requirements of a customer.

Process Costing System

A process costing system assigns costs to masses of similar units, making it an effective method for organizations that produce goods in continuous processes, like chemicals or fuel.

Conversion Costs

The sum of direct labor and manufacturing overhead costs, representing the expenses incurred to convert raw materials into finished goods.

Process

A sequence of activities linked together for performing a particular task.