Question

A monopolist produces a. more than the socially efficient quantity of output but at a higher price than in a competitive market. b. less than the socially efficient quantity of output but at a higher price than in a competitive market. c. the socially efficient quantity of output but at a higher price than in a competitive market. d. possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market

Answer 1

Answer:

B

Explanation:

First, a monopoly produce less than the socially efficient quantity because as the figure shows, the quantity produced is determined by the intersection between the marginal cost curve (MC) and the marginal revenue curve (MR) and not by the intersection between the MC and the demand. For instance, there is a deadweight loss (shown by the figure).

Second, equilibrium price is always higher than in a competitive market because is always higher than the MC. The price is determined by the equilibrium quantity (found before) and the demand. Also, there are barries to entry and so monopolist have always price control.