Question

How does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive firm?

Answer 1

   answer: monopoly market: there is only one seller in the market who produce a good with no close substitute so he has control over the price.

Perfect competition: there is large number of sellers in the market who are producing homogenous goods so they don’t have any control over the price. Firms under perfect competition are price taker.

The price and quantity under all market conditions are determined by the equilibrium condition where MC is equal to MR and the MC is increasing after the point.

The quantity produced by the monopolist is lower than the perfect competition as monopolist produce quantity at falling portion of AC curve while perfectly competitive firm produces at the point where AC is at its minimum while the price charged by the monopolist is higher than the perfect competition as price is greater than MC and MR under monopoly while price is equal to MC and MR under perfect competition.