Answer to Problem 5MCQ
(d)
Explanation of Solution
The monopoly produces a smaller quantity than the perfectly competitive firm because it charges a higher price which reduces the demand for goods. Hence, option (d) is correct.
Monopoly can produce even if MR >MC, MR=MC is the monopoly’s profit maximization condition. Hence, option (a) is incorrect.
A monopoly earns super-normal profit in the long run and a perfectly competitive market earns normal profit in long run. Hence, option (b) is incorrect.
Monopolist charges higher price due to a lack of competition and market information. Hence, option (c) is incorrect.
At equilibrium, the monopolist can produce a given quantity. Hence, option (e) is incorrect.
Introduction:
In a perfectly competitive industry, there is a large number of buyers and sellers, and a firm can sell as much as output at a market-determined price. In a perfectly competitive market, firm profit will be maximized at P = MC.
In a monopolist market, there is a single seller and a large number of buyers and monopoly profit will be maximized where MR = MC. A monopoly charges a higher price than a perfectly competitive firm and produces less than a perfectly competitive firm.
Chapter 61 Solutions
Krugman's Economics For The Ap® Course
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education