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 a price below the
perfectly competitive equilibrium price.
D. all of the above
E. B and C only

Answer 1

The true statement about monopoly is that monopolists create a contrived scarcity by selling at a price below the perfectly competitive equilibrium price. Long-run and short-run profits in a monopoly can differ, and there's debate over whether monopolies or competitive markets are better for technological advances.

Step-by-step explanation:

The correct statement about monopoly is: Monopolists create a contrived scarcity by selling at a price below the perfectly competitive equilibrium price. This means that they reduce output to raise prices, creating an artificial scarcity of the product to maximize profits. In monopoly, the long-run profit does not necessarily equal short-run profit as monopolists can sustain high levels of profits due to barriers to entry in the market. Regarding technological advances, it is debated whether monopolies or perfectly competitive firms contribute more, as monopolies may have the resources for research and development, but competitive markets may drive innovation due to competition.