Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost to maximize profit. Given the same cost curves, would you expect prices to be higher in a monopoly or a monopolistically competitive market?

Question

Business

Nero

11 October, 20:01

Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost to maximize profit. Given the same cost curves, would you expect prices to be higher in a monopoly or a monopolistically competitive market?

+3

Answers (1)

Know the Answer?

Angie Landry · Answer 1

Answer: Monopoly

Explanation: Monopoly refers to market structure in which there is only one firm in the market offering that commodity. Whereas, monopolistically competitive market have firms that offers similar product but they are not perfect substitutes for each other.

The operations of monopoly are independent of any other firms and only gets impacted by the market forces however the firms in monopolistically competitive markets are highly dependent on each other.

Thus, any increase in price would not impact much to monopoly but in the in monpolisiticallty competitive market the consumers will shift their demand to other products.