Which of the following statements correctly identifies a similarity between monopoly and perfect competition?
A) Entry is restricted in both market structures.
B) Price equals marginal cost in both market structures.
C) Production is expanded until marginal revenue equals marginal cost in both market structures.
D) Firms face an upward-sloping demand curve and a downward-sloping marginal revenue curve in both market structures.

Question

Quizplus · Accepted Answer

In both monopoly and perfect competition, firms aim to produce where marginal cost equals marginal revenue in order to maximize profit. This is because in perfect competition, firms have no market power and can only charge the market price (which equals marginal cost), while in monopoly, the firm has market power but still aims to maximize profit by producing at the quantity where marginal revenue equals marginal cost. However, options A, B, and D are incorrect because entry is not restricted in perfect competition (in fact, it is easy to enter), price does not necessarily equal marginal cost in monopoly (as the monopolist can charge a higher price and lower quantity to maximize profit), and firms face a downward-sloping demand curve and a flat marginal revenue curve in perfect competition (as they have no market power).

Which of the Following Statements Correctly Identifies a Similarity Between