Which of the Following Markets Will Have the Largest Deadweight

question 381

Multiple Choice

Which of the following markets will have the largest deadweight loss?

• A) A market that consists of perfectly competitive firms.
• B) A market that consists of a single-price monopoly.
• C) A market that consists of a perfect price discriminating monopoly.
• D) None of the above. There is no deadweight loss as long as firms produce at the level of output where marginal revenue equals marginal cost.

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Definitions:

Average Variable Cost

The variable cost per unit of output, which includes costs that vary with production, such as materials and labor.

Economic Profit

The net outcome of subtracting all expenses, both overt and hidden, from a corporation's aggregate earnings.

Short Run

A period during which at least one of a firm's inputs is fixed, limiting the firm's ability to adjust to changes in market demand or supply.

Quantity

The amount or number of a material or immaterial good that is considered as a unit or an aggregate.