Which of the Following Is an Argument in Favor of a Competitive

question 103

Multiple Choice

Which of the following is an argument in favor of a competitive market structure rather than monopoly?

• A)Monopolies have greater ability to pursue research and design.
• B)The lure of monopoly power provides a greater incentive for invention and innovation.
• C)Monopolies produce less at a higher price than competitive markets,ceteris paribus.

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Definitions:

Marginal Decision Rule

A principle stating that actions should be taken if marginal benefits exceed marginal costs.

MC = MR

A condition where a firm's marginal cost equals its marginal revenue, often used to determine the optimal level of output and price in perfect competition.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for competition based on factors other than price.

Positive Economic Profits

Earnings that exceed the total costs, including both explicit and implicit costs, signalling strong market performance.