Final answer:
In a market with less competition, output would be lower, and prices would be higher. This contrasts with perfect competitive markets where prices equal marginal costs and firms earn zero economic profits in the long run. The correct answer is option: c) output will be lower and price higher.
Step-by-step explanation:
Relative to a competitive situation, if a market lacks competition, economic theory suggests that the output will be lower and price higher. This outcome arises because firms in non-competitive markets, like monopolies or oligopolies, face less pressure to operate efficiently and have greater market power to set higher prices.
In contrast, perfect competition drives firms to produce at the minimum of average costs and set prices equal to marginal costs, leading to productive and allocative efficiency. However, in monopolistically competitive markets, firms may not reach this benchmark; instead, they will earn zero economic profits in the long-run equilibrium due to new entrants driving economic profits down to zero.