True or false? A monopoly reduces social welfare, so the government should always prohibit monopolies

Marketing Dec 26, 2020

True or false? A monopoly reduces social welfare, so the government should always prohibit monopolies. Explain.

Expert Solution

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.

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