Answer to Question #183419 in Microeconomics for James

Question

QUESTION 27

Monopolies do not supply enough output:

1. Causing a shortage in the market.
2. To satisfy the demand for their product.
3. To be allocatively efficient.
4. To be profitable.
5. To warrant consideration. 

QUESTION 28

The price is a measure of:

1. Efficiency.
2. Efficacy.
3. How much buyers can afford.
4. How much buyers value the product.
5. How much the government feels should be charged.

QUESTION 29

Monopolies may bank their profits:

1. And slack off on trying to please their customers.
2. But cannot slack off on trying to please their customers.
3. Only if they impress the sellers.
4. Only if the sellers are satisfied.
5. Whenever the government prohibits it.

Answer 1

ANSWERS.

27 To be allocatively efficient.

Explanation.

A monopoly sells a lower quantity to the market at a higher price in order to maximize profit. Consumers will therefore suffer from a Monopoly. This enables them to be allocatively efficient.

28 Price is a measure of efficiency.

Explanation.

This is because price efficiency enables both market participants to have access to all available information, which is reflected in asset prices.

29 Monopolies may bank their profits and slack off on trying to please their customers.

Explanation.

When a barrier to entry is in place, a monopoly that does not have to worry about the competition will continue to make the same old goods in the same old way, all while making a healthy profit. In an attempt to please their customers, monopolies may bank their profits and slack off.