question archive Which of the following statements is correct? a
Which of the following statements is correct? a
Subject:MarketingPrice:2.88 Bought3
Which of the following statements is correct?
a. The benefits that accrue to a monopoly firm's owners are equal to the costs that are incurred by consumers of that firm's product.
b. The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity.
c. The deadweight loss caused by a monopoly is similar to the deadweight loss caused by a tax on a product.
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- The correct option is (c). The deadweight loss caused by a monopoly is similar to the deadweight loss caused by a tax on a product.
In the monopoly market, the deadweight loss incurs as the monopolist charges the price greater than its marginal production cost to earn a higher profit. Hence, it is quite similar to a deadweight loss created by a tax which makes the market price higher than the marginal cost.
