Which of the following is not true when a monopoly market is in equilibrium?
A)Consumer well being would be improved if less resources were allocated to the industry in which the monopoly operates.
B)Price MC.
C)Price MR.
D)Price = Average Revenue.

Question

Which of the following is not true when a monopoly market is in equilibrium?
A)Consumer well being would be improved if less resources were allocated to the industry in which the monopoly operates.
B)Price > MC.
C)Price > MR.
D)Price = Average Revenue.

Quizplus · Accepted Answer

In a monopoly market, consumer well-being is not improved by allocating fewer resources to the industry in which the monopoly operates. This is because the monopoly is controlling the market and can charge higher prices than in a competitive market, which reduces consumer surplus. Therefore, option A is not true in a monopoly market in equilibrium. Options B, C, and D are true in a monopoly market in equilibrium. The monopoly will produce where MC=MR, but because it has market power, it can charge a higher price (P>MC), and the price will also be greater than the marginal revenue (P>MR). The monopoly's price will be equal to the average revenue (P=AR), which is equivalent to the demand curve.

Which of the Following Is Not True When a Monopoly