Which of the following statements is correct?

A) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero.
B) In seeking the profit-maximizing output,the pure monopolist underallocates resources to its production.
C) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest.
D) Purely monopolistic sellers earn only normal profits in the long run.

Question

ShaBreka Niameko · Accepted Answer

Final Answer : B, Explanation :  In a monopolistic market, the monopolist often produces less and charges a higher price than in a perfectly competitive market, leading to underallocation of resources to its production. This is because the monopolist's goal is to maximize profit, which can result in producing at a quantity where marginal cost is less than the price consumers are willing to pay, thus not producing enough to meet consumer demand efficiently.

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