The social costs of monopoly power arises because ?
Correct answer: D. there is too little output at too high a cost
- A. marginal cost is set equal to marginal revenue
- B. price is less than marginal cost
- C. marginal consumer benefit is less than marginal revenue
- D. there is too little output at too high a cost
Explanation
A monopolist restricts output and charges a price above marginal cost, so some mutually beneficial units are not produced. This creates too little output and a deadweight social cost.
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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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