Question

Antonia sells pasta to all the finest Italian restaurants in town. Nobody can make pasta like Antonia. As a result, hers is the only business in town that sells pasta to restaurants. Assuming that Antonia is maximizing her profit, which of the following statements is true?

a. Pasta prices will be less than marginal cost.
b. Pasta prices will equal marginal cost.
c. Pasta prices will exceed marginal cost.
d. Pasta prices will be a function of supply and demand and will therefore oscillate around marginal costs.

Answer 1

C) Pasta prices will exceed the marginal cost.

Step-by-step explanation:

Marginal cost - it is the change in total production cost that comes when there is an increase in the quantity produced.

since Antonia has created a monopoly with her pasta this will result in her being also able to increase the prices of pasta while maintaining a low production cost so which will result in a high-profit margin with increased production quantity .