A perfectly competitive firm is said to be more efficient than a monopoly firm because

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BlackTom AI · Accepted Answer

Perfectly competitive firms set price equal to marginal cost (P = MC), while a monopoly sets output where marginal revenue equals marginal cost (MR = MC) and charges the corresponding demand price P > MR. This difference in pricing rules is the core reason for the efficiency gap. 1) Relevant knowledge points and concepts - Allocative efficiency: occurs when P = MC so resources produce what consumers value at marginal cost. - Monopoly pricing: MR < P for a downward‑sloping demand curve, so monopoly chooses MR = MC and thus P > MC. - Deadweight loss: monopoly reduces output and raises price relative to perfect competition, creating welfare loss. - Other distinguishing features: perfect competition faces a perfectly elastic (horizontal) demand for the individual firm and produces homogeneous goods. 2) Step‑by‑step reasoning - In perfect competition, firms are price takers: market price equals marginal cost at the competitive equilibrium, so Qc satisfies P = MC and leads to maximum total surplus. - For a monopoly with downward‑sloping market demand P(Q), total revenue TR = P(Q)·Q, so MR = dTR/dQ = P + Q·dP/dQ, and because dP/dQ < 0, MR < P. - Monopoly chooses Qm where MR = MC. Since MR < P, the monopoly’s chosen Qm is less than the competitive quantity Qc (where P = MC), and the monopoly price Pm (read from demand at Qm) is greater than Pc. 3) Intermediate calculation (markup formula) - Using elasticity ε of demand, MR = P(1 + 1/ε). Monopoly first‑order condition MR = MC gives P(1 + 1/ε) = MC, so (P − MC)/P = −1/ε (Lerner index). Because |ε| is finite, the markup is positive → P > MC. 4) Why the correct answer is correct - Because monopolies restrict output and raise price above MC, perfectly competitive markets result in lower prices and greater output, hence greater allocative efficiency. 5) Why the other options are incorrect - (a) Irrelevant: worker hours are not a defining efficiency comparison. - (b) Wrong direction: individual competitive firms face perfectly elastic demand, not less elastic. - (c) Incorrect: perfect competition assumes homogeneous products; monopolies supply a unique product. 6) Conclusion - Therefore the correct choice is d: perfectly competitive firms charge lower prices and produce more output than monopoly firms.

A perfectly competitive firm is said to be more efficient than a monopoly firm because单项选择题

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