Suppose that the market for steel is shown in the above figure. Is social welfare greater under monopoly or under competition?
What will be an ideal response?
Under competition, the deadweight loss equals area C. To find the monopoly outcome, draw the MR curve for the monopoly that has the same vertical intercept as the demand curve but is twice as steep. Where MR = MCp determines the level of output the monopoly produces. This output is greater than 50 but less than 100. Social welfare is therefore greater under monopoly, since the monopoly quantity is closer to the socially optimal quantity than the competitive quantity.
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Which of the following represent expansionary fiscal policy?
A) an increase in marginal individual income tax rates B) an increase in average individual income tax rates C) a cut in corporate income tax rates D) a reduction in government spending
Which of the following is true of U.S. net exports prior to the 1960s?
a. Since most of the oil needs of the U.S. were met through imports, imports exceeded exports prior to the 1960s in the U.S. b. Prior to the 1960s, exports from the U.S. more or less equalled imports into the U.S. c. The U.S. was running a trade surplus prior to the 1960s. d. Prior to the 1960s, the U.S. ran twin deficits- both a current account deficit as well as a budget deficit. e. Since the U.S. dollar was overvalued prior to the 1960s, the U.S. neither exported nor imported any goods and services.