[infinity]

Compared to firms in a perfectly competitive market, a monopolist tends to:

a.

Produce substantially more and charge a higher price.

b.

Produce the same output and charge a higher price.

c.

Produce substantially less but charge a higher price.

d.

Produce substantially less and charge a lower price.

My choice was A because I thought since monopolists have less competition therefore produce more and still charge a premium. But I made a mistake thinking monopoly. But when I looked up monopolistic competition and perfect competition, the difference was differentiated products. That explains charging more, but how is it that monopolists produce less?

Correct answer: C

Explanation

Choice “c” is correct. Compared to firms in a perfectly competitive market, a monopolist tends to produce substantially less but charge a higher price.

Choices “a”, “b”, and “d” are incorrect, per above explanation.

BEC 74

Never give up, never surrender.

[stoleway]

@infinity

I hate monopolist, they operate like cartels. The truth is, a monopolist has the economic clout to produce higher output but they simply wouldnt do it because there is lack of competition and they will rather restrict output, create artificial shortages and charge more for these services or outputs.

According to demand and supply theories, prices will go up when there are few supplies and high demand.

therefore, a monopolist will always take advantage to restrict output and increase prices which goes a long way to increase their profit margin. Hope this helps.

REG -63│ 84!!
BEC- 59│70│ 71 │78!
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Mass-CPA

[stoleway]

@infinity

I hate monopolist, they operate like cartels. The truth is, a monopolist has the economic clout to produce higher output but they simply wouldnt do it because there is lack of competition and they will rather restrict output, create artificial shortages and charge more for these services or outputs.

According to demand and supply theories, prices will go up when there are few supplies and high demand.

therefore, a monopolist will always take advantage to restrict output and increase prices which goes a long way to increase their profit margin. Hope this helps.

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[Anonymous]

@infinity

A monopoly has no competition, and therefore controls the market. They can set production and prices to whichever point maximizes their profit. Lower supply generates higher prices people are willing to pay, so it's likely the monopoly would will produce however many maximizes their profits versus what the equilibrium price would be in a competitive market.

[Anonymous]

@infinity

A monopoly has no competition, and therefore controls the market. They can set production and prices to whichever point maximizes their profit. Lower supply generates higher prices people are willing to pay, so it's likely the monopoly would will produce however many maximizes their profits versus what the equilibrium price would be in a competitive market.

[Author]

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