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Assume that a monopolist and a perfectly competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c)
Assume that a monopolist and a perfectly competitive firm have the same unit costs.
Contrast the two with respect to (a) price, (b) output, (c) profits, (d) allocation of resources, and (e) impact on income transfers.
Since both monopolists and competitive firms follow the MC = MR rule in maximizing profits, how do you account for the different results? Why might the costs of a perfectly competitive firm and those of a monopolist be different? What are the implications of such a cost difference?
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