Both monopolists and monopolistically competitive firms produce the quantity at which marginal revenue equals marginal cost and then use the demand curve facing the firm to determine the price consistent with that quantity.

Question

Quizplus · Accepted Answer

This statement is true. Both monopolists and monopolistically competitive firms use the same profit maximization rule of producing the quantity at which marginal revenue equals marginal cost. However, in a monopolistically competitive market, the demand curve facing the firm is downward sloping and more elastic compared to a monopolist's demand curve, which is highly inelastic.

Both Monopolists and Monopolistically Competitive Firms Produce the Quantity at Which