Relative to a competitively organized industry, a monopoly is more likely to produce
A) more output, charges higher prices, and earns economic profits.
B) less output, charges lower prices, and earns economic profits.
C) less output, charges lower prices, and earns only a normal profit.
D) less output, charges higher price, and earns economic profits.

Question

Quizplus · Accepted Answer

A monopoly faces no competition in the market, so it has the ability to charge higher prices and earn economic profits by restricting its output. A competitively organized industry, on the other hand, has multiple firms competing with each other, which leads to lower prices and higher output. Therefore, a monopoly is more likely to produce less output, charge higher prices, and earn economic profits.

Relative to a Competitively Organized Industry, a Monopoly Is More