This principle states the profit maximizing output is that output where marginal revenue equals marginal cost. If marginal revenue is greater than marginal cost, the monopolist should increase output. If marginal revenue is less than marginal cost, the monopolist should decrease output. D. Monopoly and Competition Compared 1. Unlike a competitive industry, a monopoly does not produce the efficient output.
Monopolists charge a higher price and produce less output than a competitive industry.
Efficient output occurs where marginal social cost and marginal social benefit are equal. At the output produced by the monopolist, marginal social benefit exceeds marginal social cost. The value to consumers of an additional unit exceeds the value of the units of other goods given up to produce the additional unit - the opportunity cost.