39. When compared with the perfectly competitive industry with identical costs o

Question

39. When compared with the perfectly competitive industry with identical costs of production a monopolist will produce: a. More output and charge the same price b. More output and charge a higher price c. Less output and charge a higher price d. Less output and charge the same price Quantty Magnal Cost $ 3 40. 4 Refer to the table above. Assume that the firm is operating. If the market price is S6, a perfectly competitive profit-maximizing firm will produce: a. I unit of output. b. 2 units of output. c. 3 units of output. d. 4 units of output.

Explanation / Answer

39. Monopolist decides quantity by equating MR and MC while the price from the demand whereas in perfect competition the frm decides output such that P = MC . The MR curve is always below the demand curve, therefore the quantity in monopoly is less than the Perfect competition and price is higher.

Thus the correct option is (c)

40) produce such that P>=MC. Thus at P = $6, produce Q = 2.

Option (b) is correct.

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