The behavior of the monopolistic firm:
A)maximizes the benefits to consumers, given the resources available to the economy.
B)reduces output in order to raise prices in the short-term.
C)results in excess capacity and inefficiency.
D)both b and c

Question

The behavior of the monopolistic firm:
A)​maximizes the benefits to consumers, given the resources available to the economy.
B)​reduces output in order to raise prices in the short-term.
C)​results in excess capacity and inefficiency. 
D)​both b and c

Quizplus · Accepted Answer

A monopolistic firm has the ability to raise prices by reducing output in the short-term, resulting in higher profits. However, this also leads to excess capacity and inefficiency as the firm is not producing at the minimum efficient scale. This behavior does not maximize benefits to consumers, as they are facing higher prices and reduced choice due to lack of competition.

The Behavior of the Monopolistic Firm