Question

# Suppose that a monopolist and a perfectly competitive industry face the same cost and demand conditions....

Suppose that a monopolist and a perfectly competitive industry face the same cost and demand conditions. We will observe that the monopolist:

A) produces a smaller output and charges a higher price than does the competitive industry.

B) produces a smaller output and charges a lower price than does the competitive industry

A) produces a smaller output and charges a higher price than does the competitive industry.

Explanation :

Monopoly faces downward sloping demand curve and marginal revenue curve is below the demand curve.

Monopoly maximises it's profit where MR equals MC and charge price on the demand curve above where MR equals MC. So it produce where MR equals MC. So, price >MR =MC. But perfectly competitive firm produce where price =MC. So monopoly produce lower quantity than perfect competition but will Charge higher price than perfectly competitive firms.