Consider a Monopolist with a Private MC of $20 Per

question 4

Multiple Choice

Consider a monopolist with a private MC of $20 per unit who faces a demand curve of P = 100 - q.There is also a negative consumption externality in the market of $40 per unit.The government successively introduces competition into the supply side of the market, so now instead of a monopolist there are many price-taking firms.Which statement is true?

• A)The government intervention increases the DWL in the market from 0 to $800.
• B)The government intervention in the market decreases the DWL from $800 to $0.
• C)The government intervention reduces but does not eliminate DWL in the market.
• D)The government intervention increases DWL from $0 to $1600.
• E)None of the above.

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Definitions:

Dichotomous Thinking

A cognitive distortion involving viewing things in black and white categories, without recognizing any middle ground.

Rational Grounding

A cognitive behavioral technique that involves using reason and rational thinking to challenge and overcome irrational beliefs and fears.

Self-Talk

The internal dialogue that consists of the thoughts and beliefs an individual has about themselves and their experiences.

Irrational Belief Systems

Deeply held but unreasonable convictions or assumptions that can lead to emotional and behavioral issues.