Why is perfect competition better than a monopoly?
1 Answer
It is better for the consumers because they will have access to more quantities of the good for a lower price.
Explanation:
The price in perfect competition is always lower than the price in the monopoly and any company will maximize its economic profit (
In perfect competition, price (P) = MR = Average Revenue (AR). Since Max
The company in the monopoly has a monopoly power and can set a markup to have a positive value for
You can plot these curves in a graph with quantities in the horizontal axis and P, MC and MR in the vertical axis and use an inverted demand function to make the tests.
The inverted demand function is: