Question

Which of the following statements about monopoly is TRUE?

A. For a monopoly, long run profit is usually equal to short run profit.
B. Firms in a perfectly competitive market can create more technological advances and
thus faster economic growth than monopolies.
C. Monopolists create a contrived scarcity by selling at an output below the perfectly
competitive equilibrium output.
D. A and C only
E. all of the above

Answer 1

The true statement about monopoly is that monopolists can create contrived scarcity to maximize profits. Monopolistic competitors tend to earn zero economic profits in the long run.

Step-by-step explanation:

The correct statement about monopoly is: C. Monopolists create a contrived scarcity by selling at an output below the perfectly competitive equilibrium output. This action is taken by monopolists to maximize their profits, as they are the sole providers of a particular product or service in the market and can influence prices. Monopolistic competition, in contrast, leads to firms earning zero economic profits in the long run due to the entry and exit of firms in response to profit opportunities. Technological advances and economic growth can stem from both perfectly competitive markets and monopolies, depending on various factors such as market demand, innovation incentives, and the competitive landscape.