Question

In terms of productive efficiency, explain the impact that monopolies have on society (relative to a competitive industry).

Higher costs and higher prices

Lower prices and lower production

Higher prices and greater production

Fewer technological breakthoughs

Lower prices and higher production

Answer 1

option A

• In case of monopoly , cost and prices are higher as compared to perfect competition because in Perfect competition , production takes place at point where P = min AC so achieving the lowest cost , whereas in monopoly cost may not necessarily equal min AC .
• Also in monopoly , MC = MR is used to determine the equilibrium quantity and the price is > MR whereas in perfect competition , P= MR

So therefore , both price and cost are higher in monopoly .