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) There is no deadweight loss in this market.
(B) The marginal cost of the $100^{ ext {th }}$ sandwich is less than $\$ 10$.
(c) The market is allocatively efficient.
(D) Average total cost is minimized.
(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) There is no deadweight loss in this market.
(B) The marginal cost of the $100^{	ext {th }}$ sandwich is less than $\$ 10$.
(c) The market is allocatively efficient.
(D) Average total cost is minimized.
(E) The socially optimal quantity in this market is 100 .

Accepted Answer

∻Solution∻ ‖ a ⋮ Marginal Cost and Price: In a monopoly, the price is typically higher than the marginal cost. Since Selena's Sandwiches sells 100 sandwiches for $10 each, the price is $10. ‖‖ b ⋮ Marginal Cost of 100th Sandwich: For the 100th sandwich, the marginal cost must be less than the price ($10) because monopolies set prices above marginal cost to maximize profit. ‖ ∻Answer∻ ⚹ The marginal cost of the $100^{ ext{th}}$ sandwich is less than $10. ⚹ ∻Key Concept∻ ⚹ Marginal Cost in Monopoly ⚹ ∻Explanation∻ ⚹ In a monopoly, the price is set above the marginal cost to maximize profits. Therefore, the marginal cost of the 100th sandwich must be less than $10. ⚹◊What would be the profit-maximizing quantity for Selena's Sandwiches in the monopoly market?⍭ Generate me a similar question◊

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