Which of the following statements is true?
A) One reason a monopoly can earn economic profits is because it can raise price and restrict output.
B) A perfectly competitive firm can earn economic profits because it can raise price and restrict output.
C) Income is transferred from producers to consumers in a monopoly compared to perfect competition.
D) Monopolists who price-discriminate rarely earn positive economic profits in the long run.

Question

Quizplus · Accepted Answer

Monopolies have the ability to raise prices and restrict output due to lack of competition, which allows them to earn economic profits. However, in a perfectly competitive market, firms cannot raise prices and must accept the market price, making it difficult to earn economic profits. In a monopoly, income is transferred from consumers to producers due to the higher prices charged. Price discrimination can allow monopolists to earn positive economic profits in the long run.

Which of the Following Statements Is True