In what way are a price-taking firm and a monopoly firm alike?
A) Price exceeds marginal cost at the profit-maximizing level of output for both.
B) Both maximize profits by choosing an output where marginal revenue equals marginal cost, provided that price exceeds average variable cost.
C) In the long run, both earn zero economic profits.
D) Price equals marginal revenue for both.

Question

Quizplus · Accepted Answer

Both a price-taking firm (perfect competition) and a monopoly firm determine their profit-maximizing level of output where marginal revenue (MR) equals marginal cost (MC), as long as the price is above the average variable cost. This is a fundamental principle of profit maximization in economics.

In What Way Are a Price-Taking Firm and a Monopoly