The following figure shows the profit-maximizing output of a monopolist who faces constant average and marginal costs.
Figure 11-6
-Refer to Figure 11-6.If the firm were operating in a perfectly competitive market,the equilibrium quantity would be _____.
A)OH
B)OQ''
C)OQ
D)OQ'

Question

The following figure shows the profit-maximizing output of a monopolist who faces constant average and marginal costs.
Figure 11-6 
-Refer to Figure 11-6.If the firm were operating in a perfectly competitive market,the equilibrium quantity would be _____.
A)OH 
B)OQ'' 
C)OQ 
D)OQ'

Quizplus · Accepted Answer

In a perfectly competitive market, the firm would produce where the marginal cost curve intersects the market demand curve, which in this case is at quantity OQ. At this output level, the price would be equal to the marginal cost, leading to zero economic profits. The monopolist, on the other hand, produces where the marginal revenue equals the marginal cost, which in this case is at quantity OQ', resulting in higher prices and economic profits.

The Following Figure Shows the Profit-Maximizing Output of a Monopolist