Compared to the purely competitive firm,a pure monopoly:

Question

Quizplus · Accepted Answer

A pure monopoly is able to maintain positive economic profits in the long run by using barriers to entry, such as patents or control over a key resource, that prevent competitors from entering the market and driving down prices. This allows the monopolist to charge higher prices and earn above-normal profits. Unlike a purely competitive firm, a pure monopoly has market power, which allows it to act as a price maker rather than a price taker. Therefore, A is the correct choice.

B is incorrect because a pure monopoly can charge higher prices because of its market power, not because it needs to cover all costs in the market.

C is incorrect because a pure monopoly may not necessarily be efficient from society's perspective; it may not be using the most efficient production technology or producing at the lowest possible cost.

D is incorrect because positive economic profits do not necessarily induce competitors into the market in a pure monopoly, since the monopolist may have barriers to entry that prevent competitors from entering.

Compared to the Purely Competitive Firm,a Pure Monopoly