Question

Which of the following statements is true regarding the difference between monopoly prices and quantities compared...

Which of the following statements is true regarding the difference between monopoly prices and quantities compared to perfectly competitive prices and quantities?

Group of answer choices

Monopoly prices are higher than prices in perfect competition but quantities are lower than in perfect competition.

Monopoly prices are lower than prices in perfect competition but quantities are higher than in perfect competition.

Monopoly prices and quantities are both higher than in perfect competition.

Monopoly prices and quantities are both lower than in perfect competition.

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Homework Answers

Answer #1

Monopoly prices are higher than prices in perfect competition but quantities are lower than in perfect competition.

Explanation :

Monopoly faces downward sloping demand curve and marginal revenue curve lies below the demand curve. Monopolist produce where MR equals MC and charge price on the demand curve above where MR equals MC. Perfectly competitive firm produce where price =MC.

So price in monopoly higher than perfect competition and quantity is lower than perfect competition.

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