In the market equilibrium, a single-price monopolist: [Tick all that apply][Note: selecting wrong answers means you lose points again. So choose carefully!]Group of answer choicesalways generates lower total surplus than if the market was perfectly competitiverestricts output to increase profitscharges a price higher than the marginal costalways produces at an efficient scaleneeds to know the precise willingness to pay of each customer
Question
In the market equilibrium, a single-price monopolist: [Tick all that apply][Note: selecting wrong answers means you lose points again. So choose carefully!]Group of answer choicesalways generates lower total surplus than if the market was perfectly competitiverestricts output to increase profitscharges a price higher than the marginal costalways produces at an efficient scaleneeds to know the precise willingness to pay of each customer
Solution
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Always generates lower total surplus than if the market was perfectly competitive: This is true. A monopolist restricts output to increase price, which reduces consumer surplus and total surplus.
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Restricts output to increase profits: This is true. A monopolist will restrict output to the point where marginal cost equals marginal revenue to maximize profits.
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Charges a price higher than the marginal cost: This is true. A monopolist has the market power to set prices above marginal cost.
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Always produces at an efficient scale: This is false. A monopolist does not necessarily produce at an efficient scale. They produce where marginal cost equals marginal revenue, which may not be the point of minimum average total cost.
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Needs to know the precise willingness to pay of each customer: This is false. While it would be beneficial for a monopolist to know the precise willingness to pay of each customer, it is not necessary. They can still maximize profits by setting price where marginal cost equals marginal revenue.
Similar Questions
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