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

Question

BlackTom AI · Accepted Answer

In perfect competition firms are price takers and choose output where price (P) equals marginal cost (MC), while a monopoly maximizes profit where marginal revenue (MR) equals MC and MR < P. These profit‑maximizing rules generate the key efficiency differences. 1. Relevant concepts - Price-taking vs. price-making: competitive firms accept market price; monopolists set price above marginal revenue. - Allocative efficiency: occurs when P = MC (value to consumers equals cost of producing the last unit). - Monopoly output choice: monopolist sets MR = MC and charges the corresponding price on the demand curve, so P > MC. - Deadweight loss: monopoly’s restricted output creates welfare loss relative to competitive outcome. 2. Step‑by‑step reasoning - In perfect competition, each firm expands output until P = MC. Market supply yields an equilibrium with the largest output at the lowest possible price consistent with zero economic profit in long run. - For a monopoly, demand is the firm’s demand curve; MR lies below demand. Profit maximization: MR = MC → Qm. The price charged is on the demand curve at Qm, Pm. Because MR < P, Pm > MC at Qm. - Therefore Qm < Qc (competitive quantity) and Pm > Pc (competitive price). The reduction in Q and higher P under monopoly causes allocative inefficiency and deadweight loss. 3. Calculations - No numeric calculation is required; the inequalities suffice: Competitive: P = MC at Qc. Monopoly: MR = MC at Qm, with Pm > MC and Qm < Qc. 4. Why the correct answer is correct - Option D states perfectly competitive firms charge lower prices and produce more output than monopoly firms, which follows directly from P = MC in competition versus P > MC under monopoly. This yields higher Q and lower P in perfect competition, making it more efficient. 5. Why other options are incorrect - a: Incorrect — perfectly competitive firms face a perfectly elastic (more elastic) demand curve, not less elastic. - b: Incorrect — product differentiation is minimal in perfect competition; monopolies or monopolistic competition have more differentiation. - c: Incorrect — worker hours are unrelated to the market structure’s allocative efficiency. Conclusion: The explanation shows that option d is correct: 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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