One of the ways that a perfectly competitive firm and a nondiscriminating monopolist are different is that
A)the marginal cost curve is U-shaped for a perfectly competitive firm but not for a monopolist
B)P = AR for a perfectly competitive firm but not for a monopolist
C)P = MR for a perfectly competitive firm but not for a monopolist
D)the average revenue curve and demand curve are the same for a perfectly competitive firm but not for a monopolist
E)only the monopolist seeks to maximize profits

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker and can only sell its output at the prevailing market price, which is equal to both its average revenue (AR) and marginal revenue (MR). Therefore, P = AR = MR for a perfectly competitive firm. However, in a monopoly market, the firm has market power and can set its own price. As a result, the demand curve facing the monopolist is downward sloping, and the marginal revenue curve lies below the demand curve. Therefore, P ≠ AR and P ≠ MR for a monopolist.

One of the Ways That a Perfectly Competitive Firm and a Nondiscriminating