Comparing a perfectly competitive market to a single-price monopoly with the same costs,we see that
A) both markets are equally efficient in their use of resources.
B) the monopoly market always is more efficient in the use of resources.
C) the perfectly competitive market achieves efficiency in resource use while the monopoly market does not.
D) the monopoly market achieves efficiency in resource use while perfectly competitive market does not.
E) None of the above answers is correct because comparing a perfectly competitive market to a monopoly is impossible.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms have no market power and are price takers, meaning they cannot influence the market price. Therefore, they produce at the point where price equals the marginal cost of production, which is also the point where the value to consumers equals the cost to society. This leads to efficiency in resource use. On the other hand, a single-price monopoly has market power and can set a price higher than the marginal cost of production, leading to a lower quantity produced and a higher price than in a perfectly competitive market. This leads to a deadweight loss, which represents a loss of social welfare. Therefore, the perfectly competitive market achieves efficiency in resource use while the monopoly market does not.

Comparing a Perfectly Competitive Market to a Single-Price Monopoly with the Same