Chapter 15

The deadweight loss associated with a monopoly occurs because the monopolist

Produces an output level less than the socially optimal level

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

Sole ownership of the right to sell the drug for a limited number of years

A government-created monopoly arises when

The government gives a firm the exclusive right to sell some good or service

Without price discrimination, the monopolist sells every unit at the same price. As a consequence,

Price is greater than marginal revenue

Monopolies use their market power to

Charge a price that is higher than marginal cost