The reason a monopoly produces less than a competitive industry with identical costs is that
A)in a competitive industry there are more firms, which leaves more money available for production.
B)There is not enough information to answer this question.
C)competitive firms' marginal revenue equals marginal cost, so the industry produces at the point at which demand and marginal cost cross instead of the point at which marginal revenue and marginal cost cross.
D)monopolies are usually regulated industries, and the government limits production.
E)production costs are always higher for monopolies than for competitive firms.

Question

Quizplus · Accepted Answer

In a competitive industry, the firms produce at the point where marginal revenue equals marginal cost, which is also the point where the industry demand intersects with the total cost curve. However, in a monopoly, the firm produces at the point where marginal revenue equals marginal cost, which is a lower level of output than the level produced in a competitive industry. This is because the monopolist faces a downward-sloping demand curve and can charge a higher price for its output than a competitive firm. As a result, the monopolist reduces output to increase the price and profits.

The Reason a Monopoly Produces Less Than a Competitive Industry