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Chapter 9: Q24. (page 233)

How does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive firm?

Short Answer

Expert verified

The quantity and price produced by a monopolist are set to the profit-maximizing quantity and price, contrary to perfectly competitive firms who make zero economic profit as a result of competition.

Step by step solution

01

 Step 1: Comparison between perfect competition and monopoly

The quantity and price produced by a monopolist are set to the profit-maximizing quantity and price. This occurs because monopolists don't have competitive pressure to drive their price down, so they can produce and sell at a profit-maximizing quantity and price. If this were tried in a perfectly competitive market, a competitor would undercut their price and steal all their customers. This undercut of price occurs until all firms make zero economic profit.

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Most popular questions from this chapter

What is the usual shape of a marginal revenue curve for a monopolist? Why?

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Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose the demand for the monopoly鈥檚 product increases dramatically. Draw the new demand curve. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you?
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