Which of the following statements about a monopolist is TRUE?
A) Monopolies tend to misallocate resources.
B) All monopolies are unlawful in the United States.
C) Monopolies tend to allocate resources in a socially optimal manner.
D) Monopolies will always make a profit in the long run.

Question

Quizplus · Accepted Answer

Monopolies tend to misallocate resources because they have the ability to restrict output and charge higher prices than in a competitive market. This can lead to underproduction and higher prices than would be found in a competitive market, resulting in a less efficient allocation of resources. Allowing monopolies to exist without regulation can result in a reduction in economic welfare for society.

Which of the Following Statements About a Monopolist Is TRUE