Selena's Sandwiches operates in a monopoly and sells 100 sandwiches for $\$ 10$ 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 $100^{ ext {th }}$ sandwich is less than $\$ 10$.
(E) The socially optimal quantity in this market is 100 .

Question

Selena's Sandwiches operates in a monopoly and sells 100 sandwiches for $\$ 10$ 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 $100^{	ext {th }}$ sandwich is less than $\$ 10$.
(E) The socially optimal quantity in this market is 100 .

Accepted Answer

∻Solution∻ ‖ a ⋮ Marginal Cost: In a monopoly, the price ($P$) is typically greater than the marginal cost ($MC$). Since Selena's Sandwiches sells 100 sandwiches for $10 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 $100^{ ext{th}}$ sandwich is less than $10$. ⚹ ∻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, the marginal cost of producing the 100th sandwich must be less than $10. ⚹◊What is the relationship between marginal cost and average total cost in a monopoly market⍭ Generate me a similar question◊

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