A Monopoly Might Produce Less Than the Socially Optimal Amount

question 51

Multiple Choice

A monopoly might produce less than the socially optimal amount of pollution because

• A) it likes to be a good citizen.
• B) it sets price above marginal cost.
• C) it earns economic profit.
• D) it internalizes the external costs.

---

Definitions:

Oligopolistic Market

A market structure characterized by a small number of firms that dominate the market, often leading to limited competition.

Regional Monopoly

A regional monopoly exists when a single firm dominates the market for a particular good or service in a geographic area.

Herfindahl-Hirschman Index

A measure of market concentration that squares and then sums the market shares of all firms within an industry, indicating the level of competition.

Game Theory

A theoretical framework for conceiving social situations among competing players and for predicting their choices of strategic actions.