A Monopolist Has Decreasing Average Costs as Output Increases

question 36

Multiple Choice

A monopolist has decreasing average costs as output increases.If the monopolist sets price equal to average cost, it will

• A)produce too much output from the standpoint of efficiency.
• B)lose money.
• C)produce too little output from the standpoint of efficiency.
• D)maximize its profits.
• E)face excess demand.

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Definitions:

Credit

The granting of a loan and the creation of debt; any form of deferred payment.

Normal Balance

The typical side (debit or credit) on which an account increases, depending on the type of account.

Debit Balance

A balance in a financial account where the total debits exceed the total credits, common in asset and expense accounts.

Account

A record that summarizes all transactions related to a particular item or entity, used in financial accounting to track financial changes.