Suppose Barefeet is a monopolist that produces Ooh boots, an amazingly trendy br

Question

Suppose Barefeet is a monopolist that produces Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue curves Barefeet faces, as well as its marginal cost curve, which is constant at $40 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost (MC) is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay for them. On the following graph, use the red point (cross symbol) to indicate the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. Next, use the purple rectangle (diamond symbols) to shade in the profit if Barefeet profit maximizes. Then, use the green triangle (triangle symbols) to shade in the consumer surplus (CS) if Barefeet profit maximizes. Finally, use the black triangle (X symbols) to shade in the deadweight loss in this market. Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, you should not place the shape corresponding to that area on the graph

Explanation / Answer

Ans: Under a single-price monopoly.

Explanation:

Because monopolies have high prices which acts as a sort-of tax or deadweight loss. They also produce too few goods per price which is the same thing.

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