Question

Which of the following statements about monopoly is TRUE?

A. A technological advance can create faster growth over time for perfect competition
than for monopoly.
B. Monopolists create a contrived scarcity by producing an output below the perfectly competitive equilibrium output.
C. For a monopoly short run profit is usually greater than long run profit.
D. all of the above
E. A and B only

Answer 1

The true statement about monopoly is that monopolists create a contrived scarcity by producing less than the competitive equilibrium output. Technological advances promote faster growth in perfect competition, and a monopoly can sustain high profits in the long run due to lack of competition.

Step-by-step explanation:

The true statement about monopoly is that monopolists create a contrived scarcity by producing an output below the perfectly competitive equilibrium output. This is because monopolies do not have to fear competition due to barriers to entry and can continue to make profits without the need to innovate or please customers aggressively. Technological advances can indeed spur faster growth for perfect competition compared to monopolies, as monopolies may lack the incentive for innovation once they are established and unchallenged. As for short run versus long run profits, it is not inherently true that short run profit is usually greater than long run profit for monopolies, since they can sustain high profits over time due to lack of competition.