Chapter8: Monopoly
Section: Chapter Questions
Problem 10SQP
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Question
A
If a competitive industry, serving the same market as the monopolist, has a marginal cost of MC(Q) = Q, then
a. average cost pricing generates maximum welfare
b. antitrust action against the monopolist would generate the same welfare as maximum
c. antitrust action against the monopolist would generate less welfare than maximum price setting at marginal cost for the existing monopoly
d. antitrust action against the monopolist would generate more welfare than maximum price setting at marginal cost for the existing monopoly
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