Question

Assuming that firms try to maximize profits, how would the price and output of a monopolist compare with that of a perfectly competitive industry, ceteris paribus:

a. Under monopoly, output would be larger, and price higher.
b. Under monopoly, output
c. Under monopoly, output would be smaller, and price higher.
d. Under monopoly, output would be smaller, and price lower.

Answer 1

A monopolist, to maximize profits, would choose a lower output and a higher price compared to a perfectly competitive industry.

Step-by-step explanation:

A monopolist, to maximize profits, would choose a lower output and a higher price compared to a perfectly competitive industry, ceteris paribus. This is because a monopolist enjoys market power and faces no competition, allowing them to set prices higher than the marginal cost and restrict output to increase their profits.