Which of the following statements is TRUE?
I. The deadweight loss from a monopoly refers to the loss in consumer surplus that is captured by the monopolist as profit.
II. According to theory, if the government sets a natural monopolist's price equal to marginal cost, the socially optimum quantity of output will result.
III. Deregulation of cable television caused higher prices and fewer programming choices for customers.
A) I only
B) II only
C) I and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

I is false, as deadweight loss refers to the loss of consumer and producer surplus that occurs when the quantity of a good produced is less than the socially optimal quantity, and is not captured by the monopolist as profit.

III is also false, as deregulation of cable television actually led to lower prices and more programming choices for customers.

II is true, as setting the natural monopolist's price equal to marginal cost would lead to the socially optimum quantity of output, where the marginal benefit to consumers equals the marginal cost to society.

Which of the Following Statements Is TRUE