Which statement is true?
A) Monopoly will result in a higher price and a larger output than pure competition.
B) Monopoly will result in a higher price and a larger output than monopolistic competition.
C) Pure competition will result in a lower price and a higher output than monopolistic competition.
D) Monopolistic competition will result in a lower price and a lower output than pure competition.

Question

Quizplus · Accepted Answer

Pure competition is characterized by many small firms competing with each other, which drives the price down to a level where firms receive only normal profit. This leads to a higher output as firms produce until marginal cost equals price. In contrast, monopolistic competition and monopoly are characterized by a degree of market power, which allows firms to charge higher prices and produce less output compared to pure competition. Therefore, option C is the true statement as it correctly states that pure competition will result in a lower price and a higher output than monopolistic competition.

Which Statement Is True