A single-price monopoly with the same market demand and cost structure as a perfectly competitive market will produce
A)the same output level at the same price as the perfectly competitive market
B)less because the monopolist will not produce all units for which marginal revenue exceeds its marginal cost
C)less since the monopolist's marginal revenue curve lies below its demand curve
D)more because the monopolist will be more efficient
E)more because the monopolist's marginal cost curve slopes upward

Question

Quizplus · Accepted Answer

A monopolist faces a downward-sloping demand curve and therefore has to lower the price to sell more output. This means that the marginal revenue (MR) that the monopolist earns from each additional unit sold is less than the price. Therefore, the monopolist reduces output below the perfectly competitive level to raise the price and increase profit. This results in a deadweight loss to society. So, a single price monopolist with same demand and cost structure as a perfectly competitive market will produce less output (and charge a higher price) than a perfectly competitive market.

A Single-Price Monopoly with the Same Market Demand and Cost