Which of the following methods would help society deal with a monopoly?

• A. Reducing competition by restricting entry of new firms
• B. Imposing price ceilings to limit the monopoly's pricing power
• C. Allowing the monopoly to set prices without any government intervention
• D. Granting exclusive patents to the monopoly for a longer period

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the nature of a monopoly, which is a market structure where a single firm dominates the market with significant control over price and output, often leading to higher prices and reduced consumer surplus compared to competitive markets.
2. Step 2: Analyze the effects of restricting entry of new firms, which typically reduces competition further and can strengthen the monopoly's market power, thus not helping society deal with the monopoly problem.
3. Step 3: Consider the impact of imposing price ceilings, which are government-imposed limits on how high a price can be charged. This can prevent the monopoly from charging excessively high prices, potentially increasing consumer welfare.
4. Step 4: Evaluate the option of allowing the monopoly to set prices without any government intervention, which usually leads to the monopoly maximizing profits by restricting output and raising prices, harming consumer welfare.
5. Step 5: Assess the effect of granting exclusive patents for a longer period, which extends the monopoly power and delays competition, generally worsening the monopoly problem rather than helping society.