How do monopoly prices and quantities produced differ from perfectly competitive outcomes, all other things equal?
A) Monopoly prices and quantities are both lower than competitive outcomes.
B) Monopoly prices and quantities are both higher than competitive outcomes.
C) Monopoly prices are lower than competitive prices but monopoly quantities are higher than competitive quantities.
D) Monopoly prices are higher than competitive prices but monopoly quantities are lower than competitive quantities.

Question

Quizplus · Accepted Answer

In a monopoly market, the firm has market power and can charge a higher price than in a perfectly competitive market. Therefore, the monopoly price is higher than the competitive price. However, the monopoly firm produces a lower quantity than a perfectly competitive market because it restricts output to maximize profits. Therefore, the monopoly quantity is lower than the competitive quantity.

How Do Monopoly Prices and Quantities Produced Differ from Perfectly