CFA Practice Question

CFA Practice Question

Which of the following is correct?
A. Monopolies arise when an industry has rising average costs over a very large production amount.
B. Monopolists maximizing profits leads to deadweight losses to society.
C. In a monopolistic/oligopolistic markets prices necessarily rise as quantity sold increases.
Explanation: Monopolies arise when an industry has falling average costs over a very large production amount. Monopolies produce deadweight losses as the point at which they set production to maximize profits has MC to be lesser than Price. So the marginal consumer whose demand is not satisfied is actually willing to pay more for the product than the monopolist requires to spend to produce it.

User Contributed Comments 1

User Comment
Mikehuynh Monopoly => MC<P
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