Monopolies can misallocate resources by restricting output in an attempt to raise prices and profits.

Question

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Monopolies have the power to control prices and output levels, and may choose to limit output to increase prices and profits. This can result in a misallocation of resources, as consumers may be willing to pay a higher price for the product if more of it were available. Additionally, limited output can lead to underutilization of resources, as there may be unused capacity that could be utilized if output were higher.

Monopolies Can Misallocate Resources by Restricting Output in an Attempt