Under both perfect competition and monopoly, a firm:
A) is a price taker.
B) maximizes profit by setting marginal cost equal to marginal revenue.
C) will shut down in the short-run if price falls short of average total cost.
D) always earns a pure economic profit.

Question

Quizplus · Accepted Answer

Both in perfect competition and monopoly, firms maximize profit by setting marginal cost equal to marginal revenue. However, in perfect competition, firms are price takers, while monopolies are price makers.

Under Both Perfect Competition and Monopoly, a Firm