Under monopoly we have "unexploited gains from trade" because
A)if the firm were competitive it would have increased output in the long run.
B)if the firm were competitive it would have decreased output in the long run.
C)if the firm were competitive it would have not changed output in the long run.
D)the FCC is always trying to regulate it.

Question

Quizplus · Accepted Answer

Under monopoly, the firm restricts output and charges a higher price than it would under perfect competition. This means that there are potential gains from trade that are not being realized because the monopoly is not producing at the socially optimal level of output. In the long run, if the firm were competitive, it would increase output and bring prices down, leading to a more efficient allocation of resources and greater overall welfare for consumers. Therefore, the "unexploited gains from trade" refer to the potential benefits that could be obtained if the monopoly were replaced with a competitive market structure. The other options are not relevant to the concept of unexploited gains from trade.

Under Monopoly We Have "Unexploited Gains from Trade" Because