Question

A certain town in the Midwest obtains all of its electricity from one company, North-star Electric. Although the company is a monopoly, it is owned by the citizens of the town, all of whomsplit the profits equally at the end of each year. The CEO of the company claims that because all ofthe profits will be given back to the citi- zens, it makes economic sense to charge a monopoly price forelectricity. True or false

Answer 1

Answer:

False

Explanation:

Therefore, since the monopoly price is higher than marginal​ cost and also less than the competitive quantity is​ produced, there will be a deadweight loss even if all the profits are given back to the citizens.

A monopolist market qualities includes the charge of a higher price, produces a smaller quantity of output and gives or generate a dead weight loss to society. Usually for a monopoly to be achieved, price does not need to equal marginal cost. Monopolies is therefore not or cannot charge any price they want. .