GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A perfectly competitive industry becomes a monopoly with the same cost conditions, it will now sell
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A larger output at the old price
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A larger output at a higher price
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A reduced output at a higher price
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An unchanged output at a higher price
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Explanation:
Detailed explanation-1: -A monopolistically competitive firm is not efficient because it does not produce at the minimum of its average cost curve or produce where P = MC. Thus, a monopolistically competitive firm will tend to produce a lower quantity at a higher cost and charge a higher price than a perfectly competitive firm.
Detailed explanation-2: -A perfectly competitive firm is known as a price taker because the pressure of competing firms forces them to accept the prevailing equilibrium price in the market. If a firm in a perfectly competitive market raises the price of its product by so much as a penny, it will lose all of its sales to competitors.
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