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Author Question: Why is a single-price monopoly inefficient? What will be an ideal ... (Read 91 times)

bcretired

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on: Jun 29, 2018
Why is a single-price monopoly inefficient?
 
  What will be an ideal response?

Question 2

Uninsured patients receiving treatments at hospital emergency rooms that could have been provided less expensively at doctor's offices account for ________ of health care costs in the United States.
 
  A) almost 40 percent B) approximately 25 percent
  C) between 15 and 20 percent D) between 1 and 4 percent
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joshbk44

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Reply #1 on: Jun 29, 2018
Answer to Question 1

In a competitive market, the supply curve is the marginal social cost curve for society, and the demand curve is the marginal social benefit curve to society. The perfectly competitive market is efficient because production occurs where the quantity supplied equals the quantity demanded so that MSB = MSC. The monopolist is inefficient because price exceeds marginal cost at the quantity of output the monopoly produces. When the monopoly equates MC = MR to choose the profit-maximizing level of output, it charges a price from the demand curve that is greater than marginal cost, which means MSB > MSC. Consumer and producer surplus are not maximized and society suffers a deadweight loss.

Answer to Question 2

D


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