Compared to a perfectly competitive firm with the same cost structure, a monopoly firm will charge a:
A) higher price and sell more.
B) lower price and sell more.
C) higher price and sell less.
D) lower price and sell less.

Question

Quizplus · Accepted Answer

A monopoly firm has the ability to set the price of its product above the marginal cost in order to maximize profits. This means that it can charge a higher price than a perfectly competitive firm and sell less. A monopoly firm also faces a downward-sloping demand curve, which indicates that as the price increases, the quantity demanded decreases. Therefore, a monopoly firm will charge a higher price and sell less than a perfectly competitive firm.

Compared to a Perfectly Competitive Firm with the Same Cost