Which of the following statements is true?

Question

Quizplus · Accepted Answer

A monopoly can earn economic profits by restricting output and raising prices since it has no competitors. In contrast, in a perfectly competitive market, firms cannot earn economic profits in the long run as they are price-takers and must sell their products at the market price. Thus, option A is the only true statement. Option B is incorrect since a perfect competition firm cannot raise prices or restrict output. Option C is also incorrect since income is transferred from consumers to producers in a monopoly market. Option D could be argued either way since price discrimination can sometimes result in increased profits, but it depends on the specifics of the market. Option E is incorrect since a monopolist will produce where MC=MR, which is not necessarily equal to P.

Which of the Following Statements Is True