The main differences between a competitive firm and a monopoly are:
(i) competitive firms do not have to worry about the price effect lowering their total revenue
(ii) marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge
(iii) monopolies must lower their price in order to sell more of their product, while competitive firms do not
A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(i), (ii) and (iii)

Question

Quizplus · Accepted Answer

All three statements accurately describe key differences between competitive firms and monopolies. Competitive firms are price takers and sell their product at the market price, meaning their marginal revenue equals the price. Monopolies, on the other hand, can influence the price of their product but must lower it to sell more, affecting their total revenue and making their marginal revenue less than the price.

The Main Differences Between a Competitive Firm and a Monopoly