Monopolies supply a level of output where their marginal cost equals their marginal revenue. If a...
Monopolies supply a level of output where their marginal cost equals their marginal revenue. If a pandemic somehow increases their cost of production (including marginal costs), what will happen to their level of output, profit level, and deadweight loss to society?
Word limit is 50-150 words.
Homework Answers
When the cost of production rises , marginal cost rises , which means additional unit produced requires more cost . So the monopoly firm will raise price futher . Since the firm has market power and is the only supplier , so it can charge any price . So price charged rises further , output falls . Profit level either falls or remains unaltered due to rise in price . Deadweight loss to society rises since the price charged is further away from competitive price .
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