Under both perfect competition and monopoly, a firm:
A) faces a perfectly elastic demand curve.
B) maximizes profit by setting marginal cost equal to marginal revenue.
C) sells at a price equal to the minimum average total cost.
D) sells at a price equal to marginal cost.

Question

Quizplus · Accepted Answer

Both under perfect competition and monopoly, a firm maximizes profit by setting marginal cost equal to marginal revenue. However, in perfect competition, the firm faces a perfectly elastic demand curve, while in monopoly, the firm faces a downward-sloping demand curve. Neither A, C, nor D are true for both perfect competition and monopoly.

Under Both Perfect Competition and Monopoly, a Firm