Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

-(Exhibit: Monopoly and Monopsony) In monopoly, the equilibrium quantity of output will be where ________ , and in monopsony, equilibrium quantity of input will be where ________.

Question

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony
 
-(Exhibit: Monopoly and Monopsony) In monopoly, the equilibrium quantity of output will be where ________ , and in monopsony, equilibrium quantity of input will be where ________.

Quizplus · Accepted Answer

In monopoly, the profit-maximizing output level is where marginal revenue (MR) equals marginal cost (MC), which is the same as in perfect competition. This is because a monopolist faces a downward-sloping demand curve, so it can only increase its output by reducing the price, which lowers the revenue it earns on all units sold. In monopsony, the profit-maximizing input level is where the marginal revenue product (MRP) equals the marginal factor cost (MFC), which is similar to the condition for perfect competition but takes into account the monopsonist's ability to affect input prices by changing the quantity it purchases.

Use the Following to Answer Question 63-70