Which of the following statements is true,assuming the same cost and demand conditions?
A) A monopoly produces less output than a competitive firm.
B) A monopoly cannot earn an economic profit in the long run.
C) A monopoly charges a lower price than a competitive firm.
D) A monopoly maximizes profit where price equals marginal cost.

Question

Quizplus · Accepted Answer

A monopoly has market power and faces a downward-sloping demand curve, meaning it can charge a higher price than a competitive firm. To maximize profit, a monopoly will produce where marginal revenue equals marginal cost, which will result in a lower level of output than a competitive firm that produces where price equals marginal cost. Additionally, a monopoly can earn economic profits in the long run if barriers to entry prevent new firms from entering the market. Finally, a monopoly does not necessarily charge a lower price than a competitive firm.

Which of the Following Statements Is True,assuming the Same Cost