In some situations a monopoly might be considered more desirable than a perfectly competitive firm:
A) Because a monopoly has more incentive to keep costs down.
B) Because a monopoly is the best way to increase output above the competitive level of production.
C) If economies of scale exist and can only be realized by a single firm.
D) Since price is less than marginal revenue for a monopoly.

Question

Quizplus · Accepted Answer

If there are significant economies of scale in production, a single monopoly firm may be able to produce at a lower cost than multiple competitive firms, allowing it to offer lower prices or higher quality products. This can lead to increased social welfare and is often considered more desirable than a perfectly competitive market outcome. However, in other situations, monopolies can lead to higher prices, reduced output, and reduced incentives for innovation and efficiency.

In Some Situations a Monopoly Might Be Considered More Desirable