Which of the following did monopolies most directly threaten in a market economy?

• A. Perfectly elastic supply curves
• B. The existence of public goods
• C. The law of diminishing marginal utility
• D. Consumer welfare and market competition

Answer: (D)

Verified step by step guidance

1. Understand the role of monopolies in a market economy: A monopoly is a single seller that controls the entire supply of a good or service, which can influence prices and output levels.
2. Recall that perfectly elastic supply curves represent a market with many sellers where price does not change with quantity supplied; monopolies disrupt this by being the sole supplier, thus affecting supply elasticity.
3. Recognize that public goods are non-excludable and non-rivalrous, and monopolies do not directly threaten their existence since these goods are typically provided by the government or non-market mechanisms.
4. Consider the law of diminishing marginal utility, which states that as a consumer consumes more of a good, the additional satisfaction from each extra unit decreases; this is a consumer behavior principle and not directly threatened by monopolies.
5. Conclude that monopolies most directly threaten consumer welfare and market competition because they can set higher prices, reduce output, and limit choices, thereby harming consumers and reducing the competitive nature of the market.