Which of the following statement/statements are true?
Statement 1: In equilibrium, a monopoly firm will select a higher price and lesser quantity than a price taking firm.
Statement 2: In equilibrium, a monopoly firm will select a higher quantity and lesser price than a price taking firm.
Statement 1: In equilibrium, a monopoly firm will select a higher price and lesser quantity than a price taking firm.
Statement 2: In equilibrium, a monopoly firm will select a higher quantity and lesser price than a price taking firm.
Answer & explanation
Correct answer: option 3
The equilibrium quantity of a price taking firm (i.e. perfectly competitive firm) is higher than that of a monopoly firm. Higher quantity means lower price. So, this in turn means a monopoly firm will select a higher price and lesser quantity than a price taking firm.