Which of the following is true regarding monopoly?
A) Monopolies produce too much and charge too much from the standpoint of efficiency.
B) Monopolies usually are economically efficient because they have economic profits with which to work.
C) Monopolies produce too little and charge too much from the standpoint of efficiency.
D) Monopolies create an efficiency problem but are not associated with an equity problem.

Question

Quizplus · Accepted Answer

Monopolies have the ability to restrict output and charge higher prices in order to maximize their own profits, which leads to inefficiency, as they produce less than the socially optimal level and charge higher prices than would be seen in a competitive market. Therefore, option C is true. Option A is incorrect, as monopolies do not produce too much; they restrict output to maximize profits. Option B is incorrect, as monopolies often do not have an incentive to be economically efficient, as they do not face competitive pressures. Option D is incorrect, as monopolies can lead to both efficiency and equity problems.

Which of the Following Is True Regarding Monopoly