If there is a lack of competition in a market, a market failure results because the quantity of goods sold is ___ than the optimal level while prices are ___ than the optimal level.

Question

Quizplus · Accepted Answer

In a market with lack of competition, such as a monopoly, the quantity of goods sold is lower than the optimal level because the monopolist restricts output to maximize profits. Prices are higher than the optimal level because the monopolist can set prices above marginal cost.

If There Is a Lack of Competition in a Market