Question

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

Answer 1

Answer:

High price and low output, relative to ideal market efficiency

Explanation:

An unregulated monopolist will most likely charge a higher price in a bid to maximize its profit since the company would be the only producer of its output in the market it operates. In a bid to keep prices high, the monopolist will keep output (supply) lower than market demand leading to a scarcity and an inadvertent increase in the price of its output.

On the other hand, in an ideal market efficiency, prices are likely to be low as multiple producers produce high volume of output causing supply to be higher than demand.