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Homework answers / question archive / True or false? A monopoly reduces social welfare, so the government should always prohibit monopolies
True or false? A monopoly reduces social welfare, so the government should always prohibit monopolies. Explain.
True
The statement 'A monopoly reduces social welfare, so the government should always prohibit monopolies' is true. It is because there is only one seller in the monopoly market, which controls the whole market. The control of one seller on the whole market reduces social welfare because of a lack of competition. Hence, the government must intervene in the market to abolish monopolies.
