When a Monopolist Is Maximizing Profits

question 16

Multiple Choice

When a monopolist is maximizing profits:

• A) marginal social benefit and marginal social cost are equal.
• B) marginal social cost exceeds marginal social benefit.
• C) output level is less than the efficient level of output.
• D) no potential gains from trade exist.

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Definitions:

Profit

The financial gain achieved when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Loss

An economic condition where expenses exceed revenues, resulting in negative profit.

Price Discrimination

Price discrimination is the strategy of selling the same product at different prices to different groups of consumers, often based on their willingness to pay, location, or purchase volume.

Disguised Subsidy

Financial support given to industries or businesses in indirect ways, not easily identifiable as traditional subsidies, to lower their costs or increase their competitiveness.