Assume that an industry that was perfectly competitive suddenly becomes monopolized.Which of the following best completes the statement? A monopoly will _______ the competitive firms, taken collectively.
A) earn lower profits than
B) sell less output than
C) sell more output than
D) earn about the same profits as

Question

Quizplus · Accepted Answer

A monopolist has the power to restrict output and raise prices, which will result in the competitive firms selling less output than they did when they operated in a perfectly competitive market. This is because the monopolist uses its market power to drive up prices and limit output, which reduces the overall size of the market. As a result, the competitive firms will earn lower profits and may even exit the market.

Assume That an Industry That Was Perfectly Competitive Suddenly Becomes