Question

D. Short answer questions:

a. Compare the monopoly’s price and quantity with that of a
perfectly competitive firm’s. Which is better for the consumer?
b. How can government regulation of a monopoly increase the
allocative efficiency of the monopoly?

Answer 1

Step-by-step explanation:

compared 2 perfectly competitive firms, monopoly charges higher price and produces less quantity.

perfectly competitive firms are better for consumer

govt regulation can increase monopoly's efficiency by putting restriction on price n requiring quantity of goods produced.

Answer 2

Step-by-step explanation:

a. Monopoly has no competition so it can charge a higher price and produce less quantity when compared to a perfectly competition. For a consumer, perfectly competition which provides more goods at a lower price is better.

b. Due to lack of competition, monopoly does not have to be efficient in its resource allocation. To increase the allocative efficiency, the government can pass regulation to limit price charged and increase quantities of goods produced by the monopoly.