Question

If quantity equals 10,000 units at the lowest point on the ATC curve and MC equals MR at 12,000 units then the monopoly firm will typically choose to produce where per unit cost of production is at the minimum.

True or False

When regulating a monopoly, a problem with setting price equal to average cost is a deadweight loss exists because output is not at its socially optimal level in this market and there is no incentive for the monopolist to lower its costs.

True or False

The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly price is equal to average revenue but it is more than marginal revenue at the profit maximizing quantity.

True or False

Answer 1

1) The monopoly would choose to produce where MR=MC and not where the per-unit cost is at the minimum

False

2) True as the output is at the socially optimal level where MC=MR whereas setting P=ATC will generate a deadweight loss

3) True

The monopoly price is equal to the AR but greater than MC and MR