Asked by Alianna Jiminian on Jun 20, 2024
Verified
The authors claim that monopolists will tend to practice stronger conservation of depletable resources than would occur under a perfectly competitive market structure. Why is this true?
A) Monopolists are typically taxed at higher rates than competitive firms, so they will tend to reduce output and revenues in order to minimize their tax expenditures.
B) The profit-maximizing decisions of a monopolist tend to generate lower output levels than under perfect competition, so the resource is depleted at a slower rate by the monopolist.
C) Common property resource problems do not arise when there is only one seller.
D) The lower depletion rate used by monopolists serves as a barrier to entry.
Conservation
The practice of preserving natural resources and protecting the environment for future generations.
Monopolists
Entities that are the sole providers of a product or service in a market, allowing them to control prices.
Competitive Market
A market structure characterized by many buyers and sellers, free entry and exit, and a homogeneous product, leading to price-taking behavior.
- Understand the concept of user cost in the context of exhaustible resources and how it impacts pricing and conservation efforts.
- Explain the Hotelling rule and its application to pricing and conservation strategies for monopolists versus competitive markets.
Verified Answer
Learning Objectives
- Understand the concept of user cost in the context of exhaustible resources and how it impacts pricing and conservation efforts.
- Explain the Hotelling rule and its application to pricing and conservation strategies for monopolists versus competitive markets.
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