Relative to a perfectly competitive market,a monopoly produces
A) more output, charges higher prices, and earns economic profits.
B) more output, charges higher prices, and incurs economic losses.
C) less output, charges higher prices, and earns only a normal profit.
D) less output, charges higher prices, and earns economic profits.

Question

Quizplus · Accepted Answer

A monopoly has market power which allows it to raise prices to a higher level than what would be seen in a competitive market. This results in less output being produced than in a competitive market. Therefore, D is the correct answer as it states that a monopoly produces less output, charges higher prices, and earns economic profits.

Relative to a Perfectly Competitive Market,a Monopoly Produces