In a monopolistic market, if a firm maximizes its profit where marginal revenue equals marginal cost, what might be the consequence for consumer welfare compared to a competitive market?

In a monopolistic market, a single firm controls the entire supply of a product, which allows it to set prices higher than in a competitive market. When this firm maximizes its profit by producing where marginal revenue equals marginal cost, it often produces less output compared to a competitive market. This means fewer products are available for consumers, leading to higher prices and reduced consumer welfare. For example, if a monopolist sells a unique toy for $20 and only produces 100 units, consumers who are willing to pay more may miss out, while in a competitive market, the price could drop to $15 and more toys could be available. Ultimately, the reduced output and higher prices in a monopoly can harm consumer satisfaction and access to goods.