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Hi, thanks for answering the previous question. Here i have question again.
The following are reasons government seek to limit monopoly power of companies except 1
a. Out put is produces at a higher price than necessary
b. reduced incentive to innovate
c. reduced price discrimitation
d. high prices to limit new market entrantsMay i know why c is not?
Thank you
Are you sure that you have typed the question correctly, because as it is typed it would seem that D is the correct answer.
The answer says:
A is true – This is known as economic inefficiency
B is true – the lack of competition means monopolies can make excessive profits without having to spend on new products or processes
C is false – Monopolies are more likely to engage in price discrimination to boost profits
D is true – Monopolies may charge high prices to deter entrantsI am wondering am i reading the question or answer wrongly or it’s a typing error.
I don’t think you have misunderstood the question.
Price discrimination occurs whether or not there is a monopoly.
I think the correct answer should be D – monopolies may indeed charge high prices, but this would not deter new entrants to the market. A potential new entrant would be encouraged on the basis that they might be able to charge a lower price 🙂
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