If the average total cost curve is always above the demand curve for a monopolist:
A) the profits of the monopolist will be large.
B) the monopolist must be producing inefficiently.
C) the monopolist will suffer economic losses.
D) entry will occur, forcing the monopolist to reduce price and expand output.

Question

Quizplus · Accepted Answer

When the average total cost curve is always above the demand curve for a monopolist, the monopolist is not able to charge a price that covers all of their costs, resulting in economic losses. This is because the monopolist has market power and is able to restrict output and charge a higher price than would occur under perfect competition, but the high costs of production prevent them from earning a profit. Therefore, option C is the correct answer.

If the Average Total Cost Curve Is Always Above the Demand