The MC = MR rule of determining the socially optimal output level for a firm applies in the case of monopoly but not in the case of pure competition.

Question

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In both monopoly and pure competition, the condition for profit maximization (or socially optimal output level) is where marginal cost (MC) equals marginal revenue (MR). In pure competition, MR equals the price due to the firm being a price taker, whereas in a monopoly, MR is determined by the demand curve facing the monopolist.

The MC = MR Rule of Determining the Socially Optimal