Use the graph to answer questions -Which of the following statements is true? A)Price P₂ is optimal and efficient for both the monopolist and the market with perfect competition. B)Price P₂ is optimal for the monopolist and socially efficient. C)Price P₂ is optimal for the monopolist but is not socially efficient. D)Price P₂ is optimal and socially efficient for the market with perfect competition.

Question

Quizplus · Accepted Answer

The graph shows that the monopolist has set the price at PS1U1B12S1U1B0, which corresponds to the quantity QM. This price is higher than the socially efficient price of PS1U1B02S1U1B0, which corresponds to the quantity QPC. Thus, the monopolist is producing less than the socially efficient quantity, resulting in a deadweight loss to society. Therefore, option C is correct as the monopolist's price is not socially efficient. The other options are incorrect as they suggest that the monopolist's price is socially efficient, which is not the case.

Use the Graph to Answer Questions