Conclusions about the misallocation of resources under conditions of monopoly depend, in part, on the crucial assumption that
A) monopolies are interested in economic profits and competitive firms are not.
B) the monopolization of a perfectly competitive industry does not change the cost structure of the industry.
C) the economies of scale exist only in perfectly competitive industries.
D) the marginal cost curve of a monopolist is different from that of a perfectly competitive firm.

Question

Quizplus · Accepted Answer

The assumption that the monopolization of a perfectly competitive industry does not change the cost structure of the industry is crucial for drawing conclusions about the misallocation of resources under monopoly conditions. This assumption allows for a comparison between monopoly and competitive outcomes without introducing changes in cost structures as a confounding factor.

Conclusions About the Misallocation of Resources Under Conditions of Monopoly