If we compare a perfectly competitive market to a single-price monopoly with the same costs,the monopoly sells
A) the same quantity at a higher price.
B) a smaller quantity at a higher price.
C) a larger quantity at a lower price.
D) a larger quantity at a higher price.
E) a smaller quantity at the same price.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many small firms competing with each other, and they cannot individually influence the market price. Hence, the market price is determined by the intersection of the market demand and supply curves. On the other hand, a single-price monopoly has the power to set the price because it is the only supplier in the market. However, to maximize profits, the monopoly will produce where marginal revenue (MR) equals marginal cost (MC), which will be a lower quantity and a higher price compared to the competitive market. Therefore, the monopoly sells a smaller quantity at a higher price.

If We Compare a Perfectly Competitive Market to a Single-Price