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JAMB Economics 1991 Question 17

Question 17

Market Structures

Comparison of the price and output decisions of a perfectly competitive firm with those of a monopolist shows that the

  1. A.monopolist charges a lower price than the perfect competitor
  2. B.perfect competitor charges a lower price and produces a larger output than the monopolist
  3. C.perfect competitor produces a smaller output than the monopolist
  4. D.monopolist charges a lower price and produces a larger output than the perfect competitor
Show the answer and explanation

Answer: B (perfect competitor charges a lower price and produces a larger output than the monopolist)

Explanation

A monopolist restricts output to raise price; a competitive industry produces more and sells at a lower price.