As Adam Smith Indicated, the Trouble with Monopoly Is That

question 71

Multiple Choice

As Adam Smith indicated, the trouble with monopoly is that

• A) firms have no incentive to produce efficiently.
• B) regardless of what is produced, the firm will use too many resources.
• C) a producer has no incentive to keep his costs down.
• D) the monopolist "understocks" the market and charges too high a price.

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Definitions:

Dumping

Selling goods in a foreign market at a price below their cost of production or below the price in the domestic market.

Comparative Advantage

The principle that a country, individual, or company has over another in producing a particular good or service at a lower opportunity cost, allowing for beneficial trade and specialization.

Industrial North

The region in a country, historically in the United States, known for its heavy industry and manufacturing, contrasting with the agrarian South.

Protective Tariffs

Tariffs imposed by a country to protect its domestic industries from foreign competition by increasing the cost of imported goods.