If a monopoly can experience economies of scale, it can multiple choice 5reduce the price below a pure competitor and improve resource allocation.raise the price and lower output, which reduces resource use.raise the price above a pure competitor and improve resource allocation.lower cost and eliminate competitors, which reduces resource use.
Question
If a monopoly can experience economies of scale, it can multiple choice 5reduce the price below a pure competitor and improve resource allocation.raise the price and lower output, which reduces resource use.raise the price above a pure competitor and improve resource allocation.lower cost and eliminate competitors, which reduces resource use.
Solution
The correct answer is: lower cost and eliminate competitors, which reduces resource use.
Here's why:
A monopoly, by definition, is the only supplier in a market. This gives it the power to set prices and output levels. If a monopoly can experience economies of scale, it means that it can produce goods or services at a lower cost per unit due to increased levels of production.
This ability to lower costs can give the monopoly a competitive advantage, allowing it to potentially lower prices to a point where competitors cannot compete, effectively eliminating them. This, in turn, reduces resource use as there are fewer businesses competing for the same resources.
The other options are not correct because a monopoly does not necessarily improve resource allocation or reduce resource use by raising prices. In fact, monopolies often lead to inefficiencies in resource allocation because they can restrict output and raise prices above competitive levels, leading to allocative inefficiency.
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