The Fundamental Reason a Single-Price Monopoly Creates a Deadweight Loss

question 555

Multiple Choice

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

• A) raises variable cost.
• B) raises fixed cost.
• C) restricts output.
• D) reduces the elasticity of demand.

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Definitions:

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, a measure of how sales growth translates to growth in operating income.

Forecasting Error

The difference between the actual outcome and the predicted value in a forecast.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating a company's fixed versus variable costs.

Variable Costs

Expenses that change in proportion to the level of production or sales, such as raw materials and labor costs.