Question

Is there any circumstance under which a monopolist could produce at the

perfectly competitive quantity? Explain.

Answer 1

Yes ,a monopolist firm can produce the perfectly competitive quantity if it practices first degree price discrimination.

First-degree price discrimination, or perfect discrimination, is the highest level of price discrimination, in which each unit of production is sold at the maximum price that the consumer is willing to pay for that specific unit. The firm will gain the entire market surplus it could possibly achieve, as it will sell all the units for the maximum price at which they could be sold.

First degree price discrimination will always have as a result a Pareto efficient level of output as marginal willingness to pay will be equal to marginal cost. For this reason and even though monopolies are associated with this strategy, the production level of output will be the same as in a competitive market, and hence, the inefficiency associated to monopolies will be eliminated