Suppose the market for diamonds is a monopoly.We can expect
A)underproduction of diamonds.
B)overproduction of diamonds.
C)marginal social benefit to equal marginal social cost in the diamond market.
D)an efficient quantity of diamonds.
E)the allocation of diamonds to be first-come,first-served.

Question

Quizplus · Accepted Answer

In a monopoly, the firm has market power and produces less than the socially optimal level of output in order to charge a higher price and increase profits. This leads to underproduction of diamonds.

Suppose the Market for Diamonds Is a Monopoly