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CA Foundation · Business Economics · Price Determination in Different Markets

Compared with a perfectly competitive market with the same costs, a profit-maximising single-price monopolist typically produces:

A single-price monopolist produces less output and charges a higher price than a perfectly competitive market. It sets marginal revenue equal to marginal cost, and because marginal revenue lies below price, output is restricted and price rises above marginal cost.

  1. ALower output and charges a higher priceCorrect
  2. BHigher output and charges a higher price
  3. CLower output and charges a lower price
  4. DThe same output but charges a higher price

Explanation

A monopolist equates MR with MC, and since MR is below price, the output is lower than where price equals MC, as under perfect competition. The restricted output means the price is higher, creating a deadweight loss.

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