You are a producer! Would you prefer to operate under perfect competition or under monopoly? Why?...

Question

Question

You are a producer! Would you prefer to operate under perfect competition or under monopoly?

Why? Give two reasons to justify your argument.

Answer 1

Answer #1

Ans: Monopoly.

Explanation:

Reasons:

Under perfect competition, there are large number of competitors and no market power. Firm acts as a price taker. Optimal point is: Price = Marginal cost which provides profits less than or equal to that from monopoly optimal point: Marginal Revenue = Marginal cost in short run.
In long run, there are no profits under perfect competition as free entry and exist of firms brings price to level of minimum average cost. On the other hand, optimal point under monopoly is: MR = MC which guarantees greater profits than that of perfect competition.

Conclusion: Expected profits in monopoly are atleast or greater than that in perfect competition.

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Have a nice day ahead!

Answer 2

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