Question

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.

Answer 1

C. a higher price and produce a smaller output than a competitive firm.

Step-by-step explanation:

A monopolistic producer will charge a higher price when confronted with the same unit cost data. The producer will also produce less of the item to make it appear more in demand. In turn, this allows the producer to make more money by spending less on labor and materials. Their overhead is reduced as well. This is seen as a competitive way to market their product and make it seem better and that it sells faster so keeping up with demand is difficult, even though it is completely false.