Practicing Success
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. |
Both the statements are true. Both the statements are false. Statement 1 is true and Statement 2 is false Statement 2 is true and Statement 1 is false |
Statement 1 is true and Statement 2 is false |
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. |