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When comparing a monopoly with a competitive industry (assuming the same cost structure), monopoly quantity _____

User CPorteous
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Final answer:

A monopoly produces a lower quantity of goods at a higher price compared to a competitive industry, due to its ability to influence market prices and restrict output.

Step-by-step explanation:

When comparing a monopoly with a competitive industry, assuming the same cost structure, the quantity produced by the monopoly will typically be lower than that in a perfectly competitive market. In a competitive market, firms produce at a point where price equals marginal cost (P=MC), resulting in the highest output level possible without incurring losses. By contrast, monopolies set their quantity where marginal revenue (MR) equals marginal cost (MC), which generally occurs at a lower output level than the competitive equilibrium because they can influence the market price of their product. As a result, the monopoly quantity is lower, and the price charged is higher compared to a perfectly competitive firm.

Monopolies can maintain economic profits by restricting output and charging higher prices, as barriers to entry prevent competitors from entering the market. This situation contrasts sharply with that of perfectly competitive firms, where economic profits tend to be zero in the long run due to the lack of barriers to entry and an abundance of firms producing homogenous products.

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