Question

A monopoly creates a deadweight loss because the monopoly

		sets a price that is too low.
		makes a normal profit.
		does not maximize profit.
		produces less than the efficient quantity.
		produces more than the efficient quantity.

2.

A ________ can price discriminate if, in part, it ________.

		natural monopoly; is the only seller of a good or service
		monopoly; can prevent resales of its product
		monopoly; is the only seller of a good or service
		perfectly competitive firm; can sell goods at a lower price than a monopoly
		perfectly competitive firm; changes from a price taker to a price maker

3.

A perfectly competitive firm's short-run supply curve is

		horizontal at the market price.
		its total cost curve above the AVC.
		its marginal cost curve below the marginal revenue curve.
		its marginal cost curve above the AVC curve.
		its marginal revenue curve below the ATC curve.

Answer 1

1). produces less than the efficient quantity.

Monopoly pricing creates a deadweight loss because the firm forgoes transactions with consumers. Monopolies can become inefficient and less innovative over time because they do not have to compete with other producers in a marketplace. In the case of monopolies, abuse of power can lead to market failure.

2). monopoly; can prevent resales of its product

Price discrimination happens when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs of supply.

3). its marginal cost curve above the AVC curve

.In a perfectly competitive market, the short-run supply curve is the marginal cost (MC) curve at and above the shutdown point. The portions of the marginal cost curve below the shut down point are no part of the supply curve because the firm is not producing in that range.