In a purely monopolized environment where each monopolist succeeds at raising its price, the result is:
A) demand is lower for all goods and profits fall.
B) higher prices spread throughout the economy.
C) higher prices lead to increased competition.
D) wages increase as well, leading to higher real incomes across the population.

Question

Quizplus · Accepted Answer

In a monopolized environment where each monopolist succeeds at raising its price, the result is higher prices spread throughout the economy. This is because monopolists have the power to set prices above the competitive level and consumers have limited options to switch to substitute products. As a result, there is no increase in demand for the monopolist's product despite the increase in price. This means that the monopolist can increase profits by restricting supply and charging higher prices, leading to higher prices throughout the economy. Other factors such as lower demand and reduced profits may also be affected, but the most direct effect is the increase in prices. Option A, C, and D are incorrect because they do not accurately describe the outcome of a monopolized environment with increased prices.

In a Purely Monopolized Environment Where Each Monopolist Succeeds at Raising