Marie's Car Dealership is the only dealership in Victorville,California.The owner,Marie,experiences large economies of scale.Because she is the only seller of cars in the town,
A) Marie has market power.
B) Marie has no market power and must price at marginal cost.
C) Marie can charge any price she wants and will still sell the number of cars that maximize her profits.
D) consumer surplus is maximized in the car market.
E) total economic surplus is maximized in the car market.

Question

Quizplus · Accepted Answer

Marie has market power as she is the only seller of cars in the town, giving her the ability to charge higher prices than in a competitive market. She is not forced to price at marginal cost and can set higher prices to increase her profits. This also means that consumer surplus is lower than it would be in a competitive market, while Marie's monopoly profits increase.

Marie's Car Dealership Is the Only Dealership in Victorville,California