Which of the following is more likely for a pure monopolist than for a pure competitor?

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BlackTom AI · Accepted Answer

The question asks us to compare outcomes for a pure monopolist versus a pure competitor. 
Option 1: Economic loss. In both monopoly and perfect competition, economic losses are not the typical outcome you’d expect for a profit-maximizing firm, and monopolies can still earn profits due to market power, so this option is not the general tendency being asked about.
Option 2: Economic profit. This is the plausible direction: a pure monopolist can earn economic profits because it faces a downward-sloping demand curve, can set price above marginal cost, and typically restricts output to raise price, unlike a competitive firm that is price taker and earns normal profit in the long run. This makes economic profit more likely for a monopoly than for a competitive firm.
Option 3: Lower costs. While a monopoly might achieve economies of scale in some industries, the core distinction between monopoly and perfect competition is not about lower costs per se; it’s about market power and pricing. Therefore claiming systematically lower costs for monopolies is not generally correct.
Option 4: Normal profit. In many monopoly models, long-run profits can exceed normal profit due to profit-maximizing output and pricing, whereas a pure competitive market tends toward normal profit in the long run. Thus this option describes a more typical outcome for competitive markets, not the monopolist specifically.
Option 5: Accounting profit. Accounting profit can be positive for either type of firm and is not the distinctive feature that differentiates monopoly from competition; it’s influenced by accounting conventions and costs rather than the fundamental market structure.
In summary, the distinctive result associated with a pure monopolist—driven by market power and the ability to set prices above marginal cost—often leads to economic profits not typical for a perfectly competitive firm, which tends toward normal profit in the long run. The other options either misstate typical outcomes or confuse concepts such as costs, profits, and profit measurement across market structures.

Which of the following is more likely for a pure monopolist than for a pure competitor?

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Which of the following is more likely for a pure monopolist than for a pure competitor?

View Explanation

Log in for full answers

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