A profit maximizing monopoly's price is Group of answer choices greater than the price that would prevail if the industry was perfectly competitive. not consistently related to price that would prevail if the market was perfectly competitive. less than the price that would prevail if the industry was perfectly competitive. the same as the price that would prevail if the industry was perfectly competitive.

Question

Erick Goodwin

Business

25 November, 18:48

A profit maximizing monopoly's price is Group of answer choices greater than the price that would prevail if the industry was perfectly competitive. not consistently related to price that would prevail if the market was perfectly competitive. less than the price that would prevail if the industry was perfectly competitive. the same as the price that would prevail if the industry was perfectly competitive.

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Emmalee Huffman · Answer 1

greater than the price that would prevail if the industry was perfectly competitive.

Explanation:

Perfect Competition [PC] is a market form: in which large no. of buyers sell homogeneous goods to many sellers, at uniform prices, & both have perfect information about the goods. Monopoly [M] is a market form : having single sole seller of the good, without any close substitutes.

PC firms have constant prices. So, they have horizontal demand / average revenue (AR) curve = Marginal Revenue (MR) curve = Price (P). Monopolists have usual downward sloping demand (AR) curve & MR curve below it, implying more quantity can be sold by reducing price.

Markets produce at quantity where MR = MC.

Perfect competition : MR = AR = P; so these firms sell at P = MC & earn no economic profit. Monopolies : MR = MC reflects market quantity & market price is higher, corresponding to that quantity price at higher AR (demand) curve. So, these firms sell at P > MC, earn economic profit.