Question

How does the market price of a good in a monopoly market compare with the market price of the same good in a perfectly competitive market?

Answer 1

Hi Twilson - In a monopoly, prices are usually higher because there's no competition, whereas in a competitive market items that are not priced accordingly may never sell.

For example, if you are the only breadmaker in town you can charge whatever you want - if people want bread they have to pay your prices, period. But in a competitive market where there are 20 other breadmakers, your prices have to remain competitive with the other 20 or no one will buy your bread. Make sense?

Answer 2

Twilson, here is anothe great example that was in the news just today! Apple was busted for violating anti-trust laws in eBooks price-fixing scheme: http://money.cnn.com/2012/04/11/technology/apple-doj-ebooks/index.htm?hpt=hp_t3

Answer 3

From my understanding technically a monopoly maximizes profit since the price does not equal its Marginal Cost like in a competitive market, but the price is set according to the demand curve at the quantity where MR = MC. Usually P > MR = MC.

Answer 4

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