A dynamic analysis of a monopoly suggests that:
A)certain monopoly firms increase total surplus in the market.
B)monopoly power in markets should be restricted to induce innovation.
C)any form of monopoly is inefficient.
D)monopoly power should be restricted in order to ensure fair market prices.

Question

Quizplus · Accepted Answer

A dynamic analysis of a monopoly shows that certain monopoly firms can increase total surplus in the market by investing in research and development, improving production processes, and introducing new products. Therefore, not all forms of monopoly are inefficient, and regulations should be carefully crafted to encourage innovation while still preventing abuse of market power. Restricting monopoly power altogether may also prevent firms from achieving economies of scale and innovation, leading to a loss of welfare for consumers.

A Dynamic Analysis of a Monopoly Suggests That