Question

In the long period, level of output under monopoly is always less than under perfect competition even when a monopolist earns extra-normal profits. Do you agree?

Answer 1

Yes, it is true. In the long period, level of output under monopoly is less than under perfect competition. This is because under perfect competition, long period equilibrium is struck at the lowest point of AC. This indicates that the resources are most efficiently (optimally) utilised, offering us the highest possible output. Under monopoly, equilibrium at the lowest point (of AC) is not possible because price line slopes downward.