Compared to other market structures,monopolists ________.
A) maximize social surplus
B) encourage the entry and exit of new firms
C) set price lower than marginal revenue
D) produce goods that do not have close substitutes

Question

Quizplus · Accepted Answer

Monopolists have market power, which means they are the sole producer of a good or service without close substitutes. They can therefore set prices higher than the marginal cost of production, which reduces consumer surplus and may result in a deadweight loss to society. Monopolies do not encourage the entry of new firms because doing so would reduce their market power. Therefore, monopolies do not maximize social surplus, and they do not set prices lower than marginal revenue.

Compared to Other Market Structures,monopolists ________