In a market served by a monopoly, the marginal cost is $60 and the price is $110

Question

In a market served by a monopoly, the marginal cost is $60 and the price is $110. In a perfectly competitive market, the marginal cost is $60. What would happen to the price in each market if the marginal cost increased from $60 to $75? The monopoly would raise its price to $115, and the price in the perfectly competitive market would remain unchanged at $60. The monopoly would raise its price by less than $15, and the price in the perfectly competitive market would increase to $75. The monopoly would raise its price by $75, and the price in the perfectly competitive market would increase to $75. The price in both markets would increase by $15. In a market served by a monopoly, the marginal cost is $60 and the price is $110. In a perfectly competitive market, the marginal cost is $60. What would happen to the price in each market if the marginal cost increased from $60 to $75? The monopoly would raise its price to $115, and the price in the perfectly competitive market would remain unchanged at $60. The monopoly would raise its price by less than $15, and the price in the perfectly competitive market would increase to $75. The monopoly would raise its price by $75, and the price in the perfectly competitive market would increase to $75. The price in both markets would increase by $15.

Explanation / Answer

Option a is the right answer because , marginal cost is the amount of money which needs to be invested to produce one more unit of product so the monopoly market will increase the price by same amount. On the other hand perfect competition market is the one in which doesnot have any impact of price. It is price taker not decider.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.