Question

Discuss what you would expect to happen to the output of the industry and the level of the profit if perfect competition were replaced by a monopoly?

Answer 1

If perfect competition were replaced by a monopoly, output of the industry would decline while profit would increase. With only a single firm in the industry, it may not be able to produce the same level of output as many firms would do in perfect competition scenario. Since the single firm would enjoy the power of price control, it would increase it's profit level.