In a market served by a monopoly, the marginal cost is $60 and the price is...
| In a market served by a monopoly, the marginal cost is $60 and the price is $110. In a perfectly competitive market, the marginal cost is $60. If the marginal cost increased from $60 to $75, the monopoly would raise its price _____, and the price in the perfectly competitive market would _____. | |||
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Can you explain why this is the correct answer? Why the firms behave differently?
Homework Answers
The firms are behaving differently because they are in different market the monopoly will produce at a point where the MR=MC and that point will be always below the price level, the firm under the perfect market competition will be producing at a point where the price and the marginal cost are equal, so when the MC increases the firm under perfect competition matches it with equal rise and the monopoly increases the MC but less than the actual amount.
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In a market served by a monopoly, the marginal cost is $60 and
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