Explanation The monopolists set a high price for small output and achieve economic profits than the one achieved by the pure competitor. In the long run, the pure competitor gains no profit but in the short run, it gains some profits. At point ATC, the monopolist does not produce up to the output, or equate price with the marginal cost as its allocation of resource is inferior to the pure competitor. In monopolistic industries resources are under allocated. Thus in the short run, the pure monopolists achieve to make more profit than the pure competitor. Nevertheless, in the long run the profit can be made only by the monopoly firm. Thus, income distribution is more imbalanced with monopoly than with competition. In a pure competition, marginal revenue is equal to price. The industry supply and its output have no effect on price since the firm’s supply share is too low to compare with the market supply. So, the firms’ supply is considered to be unimportant. The cost of a commodity is established by the total demand and supply of an industry. The firm cannot increase the price based on its supply...

The pure monopolist and a purely competitive firm have the same unit costs.

MICROECONOMICS 21E W/CNCT

21st Edition

ISBN: 9781307005851

Author: McConnell

Publisher: MCG/CREATE

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Chapter 12, Problem 4DQ

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The pure monopolist and a purely competitive firm have the same unit costs.

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