"Monopolists Do Not Worry About Efficient Production and Minimizing Costs

question 132

Multiple Choice

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

• A)false; price increases will mean fewer sales, and lower costs will mean higher profits (or smaller losses).
• B)true; this is the primary reason why economists believe that monopolies result in economic inefficiency.
• C)false; the monopolist is a price taker.
• D)true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices.

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Definitions:

Disposable Income

Resources that become available for households for expenditure and saving activities following income tax deductions.

Induced Consumption

Consumption that increases when income increases and decreases when income decreases, reflecting consumers' responsive behavior to changes in income levels.

Disposable Income

The monetary flexibility households have for saving and spending after deducting income taxes.

Consumption

The use of goods and services by households, constituting a primary component of economic activity.