When comparing a monopoly with a competitive industry:
A) monopoly quantity and monopoly price will be lower than that of a competitive firm.
B) monopoly quantity will be higher, and monopoly price will be lower, than that of a competitive firm.
C) monopoly quantity will be lower, and monopoly price will be higher, than that of a competitive firm.
D) monopoly quantity and monopoly price will be higher than that of a competitive firm.

Question

Quizplus · Accepted Answer

In a competitive industry, firms compete with each other, which drives the price down and encourages firms to produce more, resulting in a higher quantity. In a monopoly, there is no competition, and the firm can charge a higher price by limiting the quantity produced. Therefore, the monopoly quantity will be lower, and the monopoly price will be higher than that of a competitive firm. Choice A and D are incorrect because they suggest that the monopoly produces more than a competitive firm, which is not true. Choice B is incorrect because while a monopoly may produce more than a competitive firm, it will always charge a higher price.

When Comparing a Monopoly with a Competitive Industry