In the Short-Run Equilibrium, a Monopolist's Profits

question 20

Multiple Choice

In the short-run equilibrium, a monopolist's profits

• A) may be positive, negative, or zero.
• B) are positive because of the monopolist's market power.
• C) are positive if the product's elasticity of demand is less than 1.
• D) are positive if the product's elasticity of demand is greater than 1.

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Definitions:

External Cost

Costs of a transaction that affect people other than the buyer or seller, typically not reflected in the market price, such as pollution or other negative externalities.

Negative Production Externality

An economic situation where the production process results in a harmful effect on third parties or the environment, which is not reflected in the cost of production.

Positive Production Externality

A situation where the production of a good or service results in beneficial effects for other people or entities that were not involved in the transaction.

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be consumed by anyone without reducing its availability to others.