Which of the following conditions holds for a monopolist,but not for a perfect competitor,at the profit-maximizing level of output?
A)Price = average revenue.
B)Marginal revenue = marginal cost.
C)Price marginal cost.
D)Profit = (AR-ATC)x Q.

Question

Which of the following conditions holds for a monopolist,but not for a perfect competitor,at the profit-maximizing level of output?
A)Price = average revenue.
B)Marginal revenue = marginal cost.
C)Price > marginal cost.
D)Profit = (AR-ATC)x Q.

Quizplus · Accepted Answer

A monopolist faces a downward sloping demand curve, meaning in order to sell more output, it must lower the price for all units sold. This results in a price that exceeds marginal cost, allowing them to earn economic profit in the short run. In contrast, a perfect competitor faces a horizontal demand curve and must price at marginal cost in order to sell any output, resulting in zero economic profit in the long run. Therefore, a monopolist can charge a higher price than a perfect competitor, and this condition holds only for a monopolist at the profit-maximizing level of output.

Which of the Following Conditions Holds for a Monopolist,but Not