In which market structure does short run equilibrium lead to a lower quantity produced and a higher price compared to perfect competition?

Introduction / Context:
This question focuses on how output and price under different market structures compare to the benchmark of perfect competition. Monopoly is particularly important because it demonstrates how market power allows a single firm to restrict output and raise prices relative to a competitive market, which has implications for consumer welfare and regulation.

Given Data / Assumptions:

• We compare short run equilibrium outcomes across different market structures.
• Perfect competition is the reference case with many small firms, free entry and price taking.
• Monopoly is a market with a single seller and barriers to entry.
• Demand and cost conditions are assumed to be similar across comparisons.

Concept / Approach:
In perfect competition, firms take price as given and produce where price equals marginal cost. Total industry output is relatively high and price is relatively low. In monopoly, a single seller chooses output where marginal revenue equals marginal cost and then charges the highest price consumers are willing to pay for that quantity. Because the monopolist faces the market demand curve, marginal revenue is below price, and the intersection with marginal cost occurs at a lower output level. This leads to output that is lower and price that is higher than in perfect competition.

Step-by-Step Solution:
1. Under perfect competition, equilibrium output is where industry supply equals demand, and individual firms produce where price equals marginal cost. 2. Under monopoly, the firm maximises profit where marginal revenue equals marginal cost, then sets price on the demand curve. 3. Because the demand curve slopes downward, marginal revenue lies below it, so the intersection with marginal cost occurs at a lower quantity. 4. At this lower monopoly quantity, the demand curve shows a higher price than in the competitive equilibrium. 5. Therefore short run monopoly equilibrium has lower quantity and higher price than perfect competition.

Verification / Alternative check:
In standard diagrams, the competitive equilibrium is at the intersection of supply and demand, while the monopoly equilibrium is where marginal revenue equals marginal cost and price is read off the demand curve above this point. Comparing the two clearly shows Q monopoly less than Q competitive and P monopoly greater than P competitive, which confirms the conceptual answer.

Why Other Options Are Wrong:
Option A: Monopsony describes a single buyer, not a single seller, and the comparison here is with perfect competition on the seller side.
Option C: Oligopoly has a few sellers and behaviour can vary widely; there is no simple universal rule that equilibrium always has lower quantity and higher price compared to perfect competition in the same straightforward way as monopoly theory.
Option D: Monopolistic competition has many firms with product differentiation; in the long run it tends to normal profit, and although price can be above marginal cost, this is not the classic case described in theory.
Option E: Perfect competition is the benchmark, not the alternative that produces lower quantity and higher price.

Common Pitfalls:
Learners often confuse monopsony with monopoly because the words sound similar. Another mistake is to think that any imperfect competition automatically gives the same result as monopoly. Always link back to the condition used for profit maximisation and how marginal revenue behaves. In monopoly, marginal revenue falls faster than price due to the downward sloping demand curve, which is the key to understanding this outcome.

Final Answer:
Monopoly