Which of the following statements is TRUE?
I. To maximize profit, a monopolist produces where P = MC.
II. Economies of scale are likely important for subways and cable TV.
III. Since producer surplus includes large monopoly profits, total surplus is higher in monopoly markets.
A) I only
B) II only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Economies of scale are important for subways and cable TV due to high fixed costs and the ability to spread these costs over a large number of users. Monopolists maximize profit where MR = MC, not P = MC. Total surplus is typically lower in monopoly markets due to deadweight loss.

Which of the Following Statements Is TRUE