When a Perfectly Competitive Industry Is Taken Over by a Monopoly,some

question 274

Multiple Choice

When a perfectly competitive industry is taken over by a monopoly,some consumer surplus is transferred to the monopolist in the form of

• A) marginal cost.
• B) economic profit.
• C) deadweight loss.
• D) taxes.
• E) average variable cost.

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Definitions:

Endowment Effect

The tendency people have to place higher valuations on items they possess (are endowed with) than on identical items that they do not possess; perhaps caused by loss aversion.

Time Inconsistency

The tendency of certain conditions or decisions to change over time, especially in the context of economic planning and policy-making.

Prospect Theory

A behavioral economics theory of preferences having three main features: (1) people evaluate options on the basis of whether they generate gains or losses relative to the status quo; (2) gains are subject to diminishing marginal utility, while losses are subject to diminishing marginal disutility; and (3) people are prone to loss aversion.

Behavioral Economists

Economists who study how psychological, social, cognitive, and emotional factors affect economic decisions and market outcomes.