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Chapter 9: Q24. (page 233)

How does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive firm?

Short Answer

Expert verified

The quantity and price produced by a monopolist are set to the profit-maximizing quantity and price, contrary to perfectly competitive firms who make zero economic profit as a result of competition.

Step by step solution

01

 Step 1: Comparison between perfect competition and monopoly

The quantity and price produced by a monopolist are set to the profit-maximizing quantity and price. This occurs because monopolists don't have competitive pressure to drive their price down, so they can produce and sell at a profit-maximizing quantity and price. If this were tried in a perfectly competitive market, a competitor would undercut their price and steal all their customers. This undercut of price occurs until all firms make zero economic profit.

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Most popular questions from this chapter

If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?

Is a monopolist a price taker? Explain briefly.

When a monopolist identifies its profit-maximizing quantity of output, how does it decide what price to charge?

In what sense is a natural monopoly "natural"?

What is the usual shape of a total revenue curve for a monopolist? Why?
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