Government actions that create monopolies
A) spur product innovation by the monopoly.
B) create deadweight loss.
C) result in lower average costs of production.
D) ensure that firms price at marginal cost.

Question

Quizplus · Accepted Answer

Government actions that create monopolies often lead to deadweight loss, as they restrict competition and allow the monopoly to charge higher prices, resulting in market inefficiencies and reduced economic welfare. While monopolies may innovate, they may also have reduced incentives to do so in the absence of competition. Lower average costs of production are not necessarily a result of monopoly power, nor are monopoly firms guaranteed to price at marginal cost.

Government Actions That Create Monopolies