If a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds earns positive economic profits, then the price of diamonds will?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The best answer to this is that the price of diamonds will be higher than it would be if there were competition.  

In this scenario, we cannot tell if the price of diamonds will go up or down.  We do not have enough information to make this determination.  All that we really do know about the price of diamonds is that it is too high.  We know that monopolies always result in inefficiency.  They produce less of a good or service than they should and they sell it at a higher price.  This is always true of a monopoly.

Therefore, all we can really say here is that the price will be too high.  We cannot know whether the price will change.

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