Compared to a perfectly competitive firm, a monopolist:
A) charges a higher price.
B) produces lower output.
C) fails to achieve an efficient allocation of resources.
D) all of the above.

Question

Quizplus · Accepted Answer

A monopolist charges a higher price than a perfectly competitive firm because it has market power and can restrict output to raise prices. It also produces a lower output than a perfectly competitive firm because it wants to maximize profits. This lower output leads to a failure to achieve an efficient allocation of resources because there is less production and consumption than would be optimal for society as a whole. Therefore, all of the above statements are true.

Compared to a Perfectly Competitive Firm, a Monopolist