Refer to Scenario 10.3. Compared to a competitive red herring industry, the monopolistic red herring industry:

A) produces more output at a higher price.
B) produces less output at a higher price.
C) produces more output at a lower price.
D) produces less output at a lower price.
E) There is not enough information to relate the monopolistic red herring industry to a competitive industry.

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Emily Uebel · Accepted Answer

Final Answer : B, Explanation :  The monopolistic red herring industry faces a downward sloping demand curve and will produce less output at a higher price compared to a competitive industry where price is determined by market forces. The marginal revenue curve is below the demand curve, indicating that the monopolist must lower the price to sell more units of the product. Therefore, the monopolistic red herring industry produces less output at a higher price.

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