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:

A. Less than the socially efficient quantity of output but at a higher price than in a competitive market.

Explanation:

The reason is that the the monopolists tries to increase the production but below the level where the marginal cost and marginal benefits becomes equal to each other. As a result to control the marginal costs, the firm starts charging higher profits to the consumers as they are bound to use the products of the monopolist. This means that the production will be below the intersection point of socially efficient quantity which will be because of charging higher prices than in a competitive market.