Which of the following is true of a pure monopoly?
A) A pure monopoly can raise the market price indefinitely.
B) A pure monopoly is typically more efficient than other firms in the market.
C) A pure monopoly faces a horizontal demand curve.
D) A pure monopoly restricts output below the competitive level.
E) A pure monopoly produces at the level where price equals marginal cost.

Question

Quizplus · Accepted Answer

A pure monopoly restricts output below the competitive level. This is because a monopoly has market power and can increase profits by decreasing output and raising prices. If a monopoly were to produce at the competitive level, it would face a market price that is equal to its marginal cost, resulting in zero economic profit.

Which of the Following Is True of a Pure Monopoly