ECONOMICS (CBSE/UGC NET)

ECONOMICS

COMPETITION AND MARKET STRUCTURES

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
How do monopolies harm consumers?
A
They eliminate competition and allow for high prices
B
They encourage competition, but increase prices
C
They increase competition and lower prices
D
They increase prices while increasing the quality of products
Explanation: 

Detailed explanation-1: -A monopoly is when a single company dominates an industry and can set prices for its product without fear of competition. Monopolies limit consumer choices and control production quantity and quality.

Detailed explanation-2: -A monopoly limits available substitutes for its product and creates barriers for competitors to enter the marketplace. Monopolies can lead to unfair consumer practices. Some monopolies such as those in the utility sector are government regulated.

Detailed explanation-3: -Because they face little or no competitive pressure, monopolists often produce inferior products because they know that customers cannot find an alternative product or service. Monopolists are free to limit production, driving prices even higher.

Detailed explanation-4: -Monopolies are bad because they control the market in which they do business, meaning that they have no competitors. When a company has no competitors, consumers have no choice but to buy from the monopoly. The company has no check on its power to raise prices or lower the quality of its product or service.

Detailed explanation-5: -Monopolies are firms who dominate the market. Either a pure monopoly with 100% market share or a firm with monopoly power (more than 25%) A monopoly tends to set higher prices than a competitive market leading to lower consumer surplus.

There is 1 question to complete.