An important difference between a perfectly competitive firm and a monopolist is that
A)the perfectly competitive firm tends to be larger
B)only the monopolist attempts to maximize profit
C)only the perfectly competitive firm maximizes profit
D)the perfectly competitive firm faces a horizontal demand curve and the monopolist faces a downward-sloping demand curve
E)only the monopolist maximizes profit at the quantity where marginal cost equals marginal revenue

Question

Quizplus · Accepted Answer

In a perfectly competitive market, there are many firms and each firm faces a horizontal demand curve, meaning they can sell as much as they want at the market price. In contrast, a monopolist is the only seller in the market and therefore faces a downward-sloping demand curve, meaning they must lower the price to sell more units. This difference in demand curves is crucial in how each firm sets its prices and maximizes profits.

An Important Difference Between a Perfectly Competitive Firm and a Monopolist