A welfare loss occurs in monopoly where ?
Correct answer: A. The price is greater than the marginal cost
- A. The price is greater than the marginal cost
- B. The price is greater than the marginal benefit
- C. The price is greater than the average revenue
- D. The price is greater than the marginal revenue
Explanation
Monopoly creates deadweight loss because it restricts output until price exceeds marginal cost. Units for which buyers' willingness to pay is above production cost are therefore not produced.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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