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

Question

Quizplus · Accepted Answer

A competitively organized industry will have many firms competing against each other to attract customers. As a result, they will produce more output to try and win market share, and will charge lower prices to stay competitive. However, because of the competition, firms will only earn a normal profit, which is enough to cover their expenses but not to earn economic profits. In contrast, a monopolized industry has no competition, so firms can restrict output and charge higher prices, leading to economic profits.

Relative to a Monopolized Industry, a Competitively Organized Industry Is