Question

Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production. a. (i) and (ii) only b. (ii) and (iii) only c. (iii) only d. (i), (ii), and (iii)

Answer 1

correct option is c. (iii) only

Step-by-step explanation:

• A monopoly is when a particular company is the sole supplier of a particular item. There is no competition for a monopoly when building a good or service.
• In a monopoly, the company determines a certain price for the good that is available to all customers. Good quantity is low and price is high (this is what makes it good).
• The monopoly price creates fatal risk because the company forgets the transaction with customers. Deadweight loss is a potential benefit that does not go to the manufacturer or the consumer.
• Monopolies become inefficient and less innovative over time because they do not have to compete with other producers in one market.
• For private monopolies, complacency can create space for potential competitors to overcome barriers to entry and enter the market. In addition, long-term options in other markets come under control when the monopoly is ineffective.