A monopolist has decreasing average costs as output increases.If the monopolist sets price equal to average cost, it will
A)produce too much output from the standpoint of efficiency.
B)lose money.
C)produce too little output from the standpoint of efficiency.
D)maximize its profits.
E)face excess demand.

Question

Quizplus · Accepted Answer

When a monopolist sets price equal to average cost, it typically produces less output than would be efficient in a perfectly competitive market. This is because the monopolist's price-setting power allows it to restrict output to increase prices, leading to less than the socially optimal level of production.

A Monopolist Has Decreasing Average Costs as Output Increases