Which of the following is true of monopoly markets? A

Marketing Jan 12, 2021

Which of the following is true of monopoly markets?

A. Dead-weight loss exists in the short run, but not in the long run.

B. A homogeneous product allows for long-run entry of competing firms.

C. Collusion between close rivals creates pricing above marginal cost.

D. Barriers to entry allow for the power to set prices above marginal cost.

E. Allocative efficiency is guaranteed because marginal revenue equals marginal cost.

Expert Solution

The correct option is D. Barriers to entry allow for the power to set prices above marginal cost.

A monopoly is a single seller in the market, and new firms cannot enter the market, and thereby giving market power to the monopolist to charge prices higher than the marginal cost.

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