Choose the statement that best compares the long- run equilibrium of a competitive industry with that in a monopolized industry (with a single price).

Question

Quizplus · Accepted Answer

In the long run equilibrium of a competitive industry, firms will produce at the lowest point on their long run average cost curve and will charge a price equal to their marginal cost. This results in allocative efficiency, which means that resources are allocated to produce the goods and services that society values the most. In contrast, in a monopolized industry with a single price, the monopolist will produce at a level where marginal revenue equals marginal cost, which is less than the level seen in a competitive industry. As a result, the monopolized industry does not achieve allocative efficiency. Therefore, choice E is the best option.

Choose the Statement That Best Compares the Long- Run Equilibrium