Compared to a competitive market with the same long-run costs and market demand,a monopolist has:
A) Less pressure to reduce costs and less incentive to improve quality.
B) Less pressure to reduce costs and more incentive to improve quality.
C) More pressure to reduce costs and less incentive to improve quality.
D) More pressure to reduce costs and more incentive to improve quality.

Question

Quizplus · Accepted Answer

A monopolist has control over the market and sets the price at a higher level than the competitive market, leading to higher profits. As a result, there is less pressure to reduce costs and more pricing power. In addition, since there is no competition, there is less incentive to improve quality as customers have no other options to choose from. Therefore, compared to a competitive market, a monopolist has less pressure to reduce costs and less incentive to improve quality.

Compared to a Competitive Market with the Same Long-Run Costs