Common sense might say that a monopolist would produce more output than a competitive industry facing the same marginal costs. After all, if you're making a profit, you want to sell as much as you can, don't you? What's wrong with this line of reasoning? Why do monopolistic industries sell less than competitive industries?

Question

Cohen Mccullough

Business

16 October, 05:40

Common sense might say that a monopolist would produce more output than a competitive industry facing the same marginal costs. After all, if you're making a profit, you want to sell as much as you can, don't you? What's wrong with this line of reasoning? Why do monopolistic industries sell less than competitive industries?

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Hopkins · Answer 1

Even though a monopolist usually controls the market price of the commodity it may not be producing more because a monopolist overall goal is to achieve profit maximization.

However, producing more output would not be in their best interest despite been the market maker because it will decrease the price of the goods in the market due to over supply, leading to lower profit for them.