Confronted with the same unit cost data, a monopolistic producer will charge
A) the same price and produce the same output as a competitive firm.
B) a higher price and produce a larger output than a competitive firm.
C) a higher price and produce a smaller output than a competitive firm.
D) a lower price and produce a smaller output than a competitive firm.

Question

Quizplus · Accepted Answer

A monopolistic producer has market power, which means they can charge a higher price than a competitive firm. However, this also means that they will sell a smaller output than a competitive firm, as they face a downward-sloping demand curve. So, they will charge a higher price and produce a smaller output than a competitive firm.

Confronted with the Same Unit Cost Data, a Monopolistic Producer