Relative to a perfectly competitive market, as long as the monopolist does not benefit from substantial economies of scale,
A)price and quantity are higher under monopoly
B)price and quantity are lower under monopoly
C)quantity is higher and price is lower under monopoly
D)quantity is lower and price is higher under monopoly
E)there are no differences in price and quantity

Question

Quizplus · Accepted Answer

A monopolist has the power to raise the price of its product by reducing the quantity supplied. Thus, compared to a competitive market, a monopolist will produce less output and charge a higher price. This is because the monopolist has market power and can manipulate the price to increase its profit. Therefore, quantity is lower and price is higher under monopoly. If the monopolist does not benefit from substantial economies of scale, it will not be able to produce at lower costs than competitors and will not have a significant cost advantage.

Relative to a Perfectly Competitive Market, as Long as the Monopolist