The De Beers Company, one of the longest-lived monopolies, is facing increasing competition.One source of competition comes from people who might resell their previously owned diamonds.Why is De Beers worried that people might resell their previously owned diamonds?
A)because De Beers will not be able to guarantee the quality of previously owned diamonds and fears that its reputation might be harmed
B)because the availability of previously owned diamonds would increase the market demand for diamonds and dilute De Beers' monopoly
C)because previously owned diamonds would be a close substitute to newly mined diamonds and therefore reduce De Beers' market power
D)because the availability of previously owned diamonds would make the market demand curve for diamonds more inelastic and force De Beers to lower its price

Question

Quizplus · Accepted Answer

Previously owned diamonds provide an alternative for consumers, which can reduce the market power of De Beers. This can potentially reduce the price of newly mined diamonds, which would impact De Beers' revenue and its long-standing monopoly. Additionally, the availability of previously owned diamonds can make consumers more price-sensitive and less likely to pay a premium for newly mined diamonds, which could further erode De Beers' market power.

The De Beers Company, One of the Longest-Lived Monopolies, Is