Comparison of the price and output decisions of a perfectly competitive firm with those of a monopolist shows that the?
Answer Details
The comparison of the price and output decisions of a perfectly competitive firm with those of a monopolist shows that the perfect competitor charges a lower price and produces a larger output than the monopolist. This is because in a perfectly competitive market, there are many firms producing identical goods and services and no individual firm has control over the market price. Therefore, a perfectly competitive firm must accept the market price and produce at the level where its marginal cost equals the market price.
On the other hand, a monopolist is the sole producer of a particular good or service and has significant control over the market price. As a result, a monopolist can charge a higher price and produce a lower output compared to a perfectly competitive firm. This is because a monopolist can restrict output to increase price and profit. Thus, the comparison shows that perfect competition results in lower prices and larger outputs compared to monopoly.