A Single- Price Monopoly Causes a Deadweight Loss Because It

question 33

Multiple Choice

A single- price monopoly causes a deadweight loss because it _______.

• A) increases marginal cost
• B) restricts its output so it is less than the efficient quantity
• C) increases the amount produced beyond the efficient quantity
• D) maximises marginal revenue rather than minimises marginal cost

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Definitions:

Average Total Cost

The total cost of production divided by the quantity of output produced; it includes all variable and fixed costs.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Long-run Average Total Costs

The average cost per unit of output where all inputs, including capital, are variable and the firm has adjusted all inputs to find the lowest average cost.

Long-run Marginal Cost

The change in total cost when producing one additional unit of a product or service in the long term, where all inputs are considered variable.