in comparing monopoly to a perfect competitive market, which of the following is correct? a. equilibrium...

in comparing monopoly to a perfect competitive market, which of the following is correct?

a. equilibrium quantity will be higher under perfect competition

b. consumers will be better off with the monopoly

c. market price will be higher under perfect competition

d. employment will be higher under monopoly

Solutions

Expert Solution

Option A is correct

Equilibrium quantity will be higher under perfect competition. Because firm is producing where P=MC i.e. at a level which is socially optimum .

Option B is not correct because monopoly will charge higher price compare to perfect competition therefore there is loss in consumer surplus and they are worse off

Option C is not correct because monopoly charge higher price as compare to perfect competition because they equate MR=MC to determine quantity and price is determined by demand curve corresponding to demand curve.

Option D is not correct because under monopoly there is only 1 firm but under perfect competition there so many firms thus more employment.

Rahul Sunny answered 1 year ago

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