If Marginal Cost Is Constant, What Happens to a Market

question 76

Multiple Choice

If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs?

• A) Consumer surplus decreases, producer surplus increases and a deadweight loss is created.
• B) Consumer surplus decreases, producer surplus decreases and a deadweight loss is created.
• C) Consumer surplus increases, producer surplus decreases and a deadweight loss is created.
• D) Consumer surplus increases, producer surplus increases and a deadweight loss is created.

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Definitions:

Property Rights

Legal rights to use, control, and derive benefits from a resource, asset, or property, including the right to exclude others from using it.

Demographic Transition

A model that describes the transformation of a society from high birth and death rates to low birth and death rates as a country develops from a pre-industrial to an industrialized economic system.

Renewable Resources

Natural resources that can be replenished naturally over short periods of time, such as solar energy, wind, and water.

Nonrenewable Resources

Nonrenewable resources are natural resources that cannot be replenished or replaced at the same rate at which they are consumed, such as oil, coal, and natural gas.