Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit-maximizing outputs?
A)Marginal revenue is less than price.
B)Marginal revenue equals marginal cost.
C)Price equals marginal cost.
D)Average revenue equals average cost.

Question

Quizplus · Accepted Answer

A monopolist faces a downward sloping demand curve and therefore must reduce its price in order to sell more output. As a result, the marginal revenue received from selling an additional unit of output is less than the price. In a perfectly competitive market, however, the individual firm is a price taker and its marginal revenue is equal to the market price.

Which of the Following Statements Applies to a Monopolist but Not