Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are
A)less of a concern for a monopoly than competitive market.
B)offset by the higher profits earned by a monopolist.
C)a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Monopoly pricing reduces the quantity produced by a monopolist in comparison to a competitive market, resulting in fewer goods being available at a higher price. This reduction in production leads to a decrease in the number of mutually beneficial trades that take place. Therefore, choice C is correct. Choice A is incorrect because the concern for unrealized, mutually beneficial trades should be higher for a monopoly since it leads to a decrease in social welfare. Choice B is also incorrect because higher profits earned by a monopolist do not make up for the loss of social welfare caused by unrealized trades.

Monopoly Pricing Prevents Some Mutually Beneficial Trades from Taking Place