Essentials of Economics 2nd Edition by Campbell McConnell, Randy Grant, Stanley Brue

Exercise 6

Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, (d) allocation of resources, and (e) impact on the distribution of income. Since both monopolists and competitive firms follow the MC = MR rule in maximizing profits, how do you account for the different results Why might the costs of a purely competitive firm and those of a monopolist be different What are the implications of such a cost difference