Monopoly Formation Impacts

Steps:

• Recall perfect competition features many firms, low barriers, and zero long-run profits due to free entry.
• In a monopoly, a single firm dominates with high barriers to entry, reducing competition.
• Monopolies restrict output to raise prices, earning positive long-run economic profits.
• Competition decreases as the market shifts from many rivals to one seller.

Why C is correct:

• Monopolies achieve long-run profits through market power (no entry erodes profits, unlike competition's zero-profit condition).

Why the others are wrong:

• A: Barriers to entry increase in monopolies; economies of scale may enable but don't decrease.
• B: Consumer choice decreases with one seller; prices rise due to reduced output.
• D: Output decreases as monopolies produce less than competitive markets; market share increases for the monopolist.

Final answer: C