Which of following is true of monopoly and not of perfect competition?
A)Profit is maximized where marginal cost equals marginal revenue
B)The industry demand curve is also the firm's demand curve
C)Normal profits are made only if average total cost equals average revenue
D)Profit is maximized in the elastic portion of the demand curve
E)the firm has no control over the market price

Question

Quizplus · Accepted Answer

In perfect competition, the industry demand curve is horizontal and the firm is a price taker, meaning the market price is determined by supply and demand forces and the firm has no control over it. In contrast, in a monopoly, the firm has market power and can choose a higher price by reducing the quantity produced. As a result, the firm faces a downward-sloping demand curve that represents the entire market demand for its product. Therefore, the industry demand curve and the firm's demand curve are the same in a monopoly.

Which of Following Is True of Monopoly and Not of Perfect