Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i)
Socially-optimal level of output.
(ii)
Market solution for profit-maximizing competitive firms.
(iii)
Market solution for a profit-maximizing monopoly.
A)(i) and (ii) only
B)(ii) and (iii) only
C)(i) and (iii) only
D)(i), (ii), and (iii)

Question

Quizplus · Accepted Answer

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve leads to the socially-optimal level of output in a perfectly competitive market (i) and the market solution for profit-maximizing competitive firms (ii). It does not align with the market solution for a profit-maximizing monopoly (iii), as a monopoly would set a higher price and produce a lower quantity to maximize profits.

Selling a Good at a Price Determined by the Intersection