Assume a monopolist and a perfectly competitive firm face the same market demand and cost curves.

How does the output and price in a monopoly compare to the output and price in perfect competition?

Choose 1 answer:
(A) Monopoly produces the same quantity and charges a higher price than in perfect competition.
(B) Monopoly produces a lower quantity and charges a higher price than in perfect competition.
(c) Monopoly produces a lower quantity and charges a lower price than in perfect competition
(D) Monopoly produces a higher quantity and charges a higher price than in perfect competition.
(E) Monopoly produces a lower quantity and charges the same price as perfect competition.

Question

Assume a monopolist and a perfectly competitive firm face the same market demand and cost curves.

How does the output and price in a monopoly compare to the output and price in perfect competition?

Choose 1 answer:
(A) Monopoly produces the same quantity and charges a higher price than in perfect competition.
(B) Monopoly produces a lower quantity and charges a higher price than in perfect competition.
(c) Monopoly produces a lower quantity and charges a lower price than in perfect competition
(D) Monopoly produces a higher quantity and charges a higher price than in perfect competition.
(E) Monopoly produces a lower quantity and charges the same price as perfect competition.

Accepted Answer

∻Solution∻ ‖ a ⋮ Monopoly vs. Perfect Competition Output: In a monopoly, the firm is the sole provider of the good or service and will produce where marginal revenue (MR) equals marginal cost (MC). In perfect competition, firms are price takers and will produce where the price (P) equals MC. Since the MR curve lies below the demand curve for a monopolist, the output level where MR = MC is less than where P = MC. ‖ ‖ b ⋮ Monopoly vs. Perfect Competition Price: A monopolist has market power and can set a price higher than the marginal cost. In perfect competition, firms cannot set prices above the market equilibrium since there are many sellers, leading to a price equal to the marginal cost in the long run. Therefore, the price charged by a monopolist will be higher than that in perfect competition. ‖ ∻Answer∻ ⚹ (B) Monopoly produces a lower quantity and charges a higher price than in perfect competition. ⚹ ∻Key Concept∻ ⚹ Monopoly Output and Pricing ⚹ ∻Explanation∻ ⚹ A monopolist produces less and charges a higher price compared to a perfectly competitive market because the monopolist maximizes profits where MR = MC, which occurs at a lower quantity and allows for a higher price due to lack of competition. ⚹◊What is the formula for calculating the equilibrium output and price in perfect competition and monopoly market structures?⍭ Generate me a similar question◊

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