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Question
Microeconomics
Posted 2 months ago

Selena's Sandwiches operates in a monopoly and sells 100 sandwiches for $10\$ 10 each.

Based on this information, which of the following can we be certain is true?

Choose 1 answer:
(A) Average total cost is minimized.
(B) The market is allocatively efficient.
(C) There is no deadweight loss in this market.
(D) The marginal cost of the 100th 100^{\text {th }} sandwich is less than $10\$ 10.
(E) The socially optimal quantity in this market is 100 .
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Answer from Sia
Posted 2 months ago
Solution
a
Marginal Cost: In a monopoly, the price (PP) is typically greater than the marginal cost (MCMC). Since Selena's Sandwiches sells 100 sandwiches for 10each,wecaninferthatthepriceofthe100thsandwichis10 each, we can infer that the price of the 100th sandwich is 10. Therefore, the marginal cost of the 100th sandwich must be less than $10
Answer
(D) The marginal cost of the 100th100^{\text{th}} sandwich is less than 1010.
Key Concept
Marginal Cost in Monopoly
Explanation
In a monopolistic market, the price is usually set above the marginal cost to maximize profit. Given that Selena's Sandwiches sells each sandwich for 10,themarginalcostofproducingthe100thsandwichmustbelessthan10, the marginal cost of producing the 100th sandwich must be less than 10.

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