One advantage of monopoly firms is that

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BlackTom AI · Accepted Answer

When evaluating monopoly advantages, it helps to recall basic monopoly characteristics and how they contrast with perfect competition.
Option a: 'they charge a price equal to marginal cost.' This is false for most monopolies because monopolists maximize profit by setting price above marginal cost, resulting in an area of deadweight loss. Charging at marginal cost would align with perfectly competitive pricing, not monopoly pricing.
Option b: 'they can grow to a large size, enabling them to achieve economies of scale.' This is plausible as an advantage, since a monopoly can exploit economies of scale due to its large, dominant position and high output, lowering average costs over a range of production. This matches the typical supplier-side benefit of market power and scale economies.
Option c: 'they produce a homogeneous product.' While some monopolies may produce similar goods, a defining feature of a monopoly is not the product type per se but the absence of close substitutes due to market power. The statement overgeneralizes about product homogeneity and is not a general advantage unique to monopolies.
Option d: 'they charge lower prices and product more output than perfectly competitive firms.' This contradicts the standard depiction of monopoly behavior, where the firm charges a higher price and produces less output than in perfect competition, to maximize profit and restrict supply.
Thus, among the options, the statement describing growth to a large size enabling economies of scale aligns with a real advantage a monopoly can possess, whereas the others misstate typical monopoly pricing, output, or product characteristics.

MUF0061 Economics Unit 1 - Semester 2, 2025 Revision Quiz - Efficiency of Perfect Competition and Monopoly (10 - 12 minutes)

One advantage of monopoly firms is that

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