Which of the following is an argument in favor of a competitive market structure rather than monopoly?
A) Monopolies have greater ability to pursue research and design.
B) The lure of monopoly power provides a greater incentive for invention and innovation.
C) Monopolies produce less at a higher price than competitive markets, ceteris paribus.
D) Economies of scale allow a single firm to produce at lower cost than in a competitive market, ceteris paribus.

Question

Quizplus · Accepted Answer

In a competitive market structure, firms are forced to produce efficiently and offer competitive prices in order to stay in business. On the other hand, monopolies have the ability to charge higher prices because they do not face any competition. This leads to a reduction in output and an increase in price, which is detrimental to consumer welfare. Therefore, a competitive market structure is preferable to a monopoly as it leads to lower prices and greater output, ceteris paribus.

Which of the Following Is an Argument in Favor of a Competitive