Suppose a perfectly competitive firm and a monopolist are both charging $5 for their respective products. From this, one can infer that:
A)the marginal benefit from selling an additional unit of output is $5 for both firms.
B)the marginal benefit from selling an additional unit of output is $5 for the competitive firm and less than $5 for the monopolist.
C)the marginal benefit from selling an additional unit of output is less than $5 for both firms.
D)the competitive firm is charging too much, and the monopolist is charging too little.

Question

Quizplus · Accepted Answer

Perfectly competitive firms face a horizontal demand curve, so selling an additional unit of output increases revenue by the price of the good. Imperfectly competitive firms face a downward-sloping demand curve, so selling an additional unit of output increases revenue by less than the price of the good.

Suppose a Perfectly Competitive Firm and a Monopolist Are Both