Which of the following is true of pure monopolies?
A) Monopolies earn positive economic profits in the long run.
B) Monopolies produce output that is greater than the competitive level.
C) Monopolies produce products that have a negligible marginal cost but a high fixed cost.
D) Monopolies reduce welfare by engaging in excessive product differentiation.
E) Answers monopolies earn positive economic profits in the long run and monopolies reduce welfare by engaging in excessive product differentiation are both correct.

Question

Quizplus · Accepted Answer

Monopolies can earn positive economic profits in the long run due to barriers to entry that prevent competitors from entering the market. This allows them to maintain prices above marginal costs. The other options are incorrect characterizations of monopolies.

Which of the Following Is True of Pure Monopolies