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

For both a monopolist and a competitive firm, the primary objective is to maximize profits. To do this, they must consider the relationship between the price of the product, the cost of production, and the quantity produced. In general, firms maximize profits by producing the quantity where marginal cost (MC) equals marginal revenue (MR).

In a perfectly competitive market, there are a large number of firms producing identical products. Due to the perfect competition, no single firm has control over the market price, and hence they are price takers. In this scenario, a firm maximizes its profits by producing a quantity where P = MC, where P is the market-determined price.

A monopoly is a market with a single firm that controls the entire supply of a good or service with no close substitutes. Unlike perfectly competitive firms, a monopolist has price-setting power. Since they are the only firm in the market, they can alter the output to affect the market price. To maximize profits, a monopolist produces the quantity where MR = MC. However, since the monopolist has price-setting power, the marginal revenue (MR) curve will be downward-sloping. This means that the price a monopolist charges is higher than the MC, i.e., P > MC.

Comparing the two market structures, we can observe the following: - Quantity produced: A perfectly competitive firm produces more output compared to a monopolist because it equates the market price with its marginal cost (P=MC), while a monopolist equates marginal revenue with marginal cost (MR=MC). Since the MR curve lies below the demand curve for a monopolist, the monopolist produces a lower quantity than the competitive firm. - Price charged: A monopolist charges higher prices compared to perfectly competitive firms because the monopolist equates marginal revenue with marginal cost (MR=MC), while a competitive firm equates market price with marginal cost (P=MC). As the monopolist has price-setting power, the price charged is higher than the marginal cost, i.e., P > MC. In conclusion, a monopolist produces a lower quantity and charges a higher price compared to a perfectly competitive firm due to the differences in market structures and profit-maximization objectives.