Suppose that a perfectly competitive firm and a monopolist are both charging $5 per unit for their respective outputs.One can infer that
A) marginal revenue is $5 for both firms.
B) marginal revenue is $5 for the competitive firm and less than $5 for the monopolist.
C) marginal revenue is less than $5 for both firms.
D) the competitive firm is charging too much and the monopolist too little.
E) both firms are earning a profit.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, price equals marginal revenue, so the competitive firm's marginal revenue is $5. For a monopolist, marginal revenue is less than the price due to the downward-sloping demand curve, so it is less than $5.

Suppose That a Perfectly Competitive Firm and a Monopolist Are