A profit-maximizing monopoly produces a lower output level than would be produced if the industry was perfectly competitive.

Question

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A monopolist has market power and can charge a higher price than a competitive industry. To maximize profit, the monopolist chooses to produce at a quantity where marginal revenue equals marginal cost, which is a lower output level than the competitive industry's output level, where price equals marginal cost.

A Profit-Maximizing Monopoly Produces a Lower Output Level Than Would