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Chapter 24: Q. 24.5LO (page 535)

Explain the social cost of monopolies.

Short Answer

Expert verified

Theresults of having a monopolistic market ascritical a competitive market is restricted output andthe next price.

Step by step solution

01

Introduction

Monopoly creates a social cost, called a deadweight loss, because some consumers who would be willing topurchase the merchandise up to itsmonetary value (MC),aren't served.

02

Given Information

In a monopoly,there's no supply curve because monopolists are price setters and not
price takers.

03

Explanation

The MC curveisn't the firm鈥檚 supply curve.
In a competitive market, firmsshould passively take themarket value as given.the provision curve describes the quantitiesthey'll placed on the market at any given price. If the firmmay be a monopoly itdoesn't need that information becauseit's settingthe value.

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Most popular questions from this chapter

Currently, a monopolist's profit-maximizing output is 200units per week. It sells its output at a price of \(60per unit and collects \)30 per unit in revenues from the sale of the last unit produced each week. The firm's total costs each week are $9,000. Given this information, what are the firm's maximized weekly economic profits and its marginal cost?

A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. The manager argues that surely the firm must not be maximizing its economic profits. Is this argument correct?

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