Evaluate whether the following statements are true, false

a) A monopoly equilibrium is not efficient. A monopoly does not produce at a level where marginal cost equals price. Since a monopoly has market power, it has to take into consideration any negative impact on price when it increases production. As a result, its marginal revenue is lower than the price of its product. Even though marginal cost equals marginal revenue, the quantity produced is lower than in perfect competition and price is higher than in perfect competition. The statement is false.

b) Price ceilings interfere with free markets. For example, if there is a ceiling on rent, supply of rental units is adversely affected. It creates a shortage and often creates a black market where actual rents are higher than official rents. Search activity goes up and is a loss to the society. Those who find housing may benefit from lower rents but others can't find any housing at all even though they are willing to pay a higher rent. Overall, it is not an efficient allocation. The statement is false.

c) The opportunity cost of a free cone is zero. Opportunity cost refers to the next best use. If the cone costs nothing, there is no opportunity cost. The statement is true.

d) A rise in price results in a movement along the demand curve. Demand curves shift due to reasons other than price change of the product e.g. rise in overall income. The statement is false.