-The above figure shows the market demand curve for long-distance land-based telephone calls.Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry.If the firms in the industry operate as perfect competitors,the price of a call is ________ per minute and if the firms in the industry operate as a monopoly,the price of a call is ________ per minute.
A) 2 cents; more than 3 cents and less than 4 cents
B) more than 3 cents and less than 4 cents; more than 3 cents and less than 4 cents
C) 1 cents; 2 cents
D) 2 cents; either equal to 4 cents or more than 4 cents
E) either equal to 4 cents or more than 4 cents; 2 cents

Question

-The above figure shows the market demand curve for long-distance land-based telephone calls.Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry.If the firms in the industry operate as perfect competitors,the price of a call is ________ per minute and if the firms in the industry operate as a monopoly,the price of a call is ________ per minute.
A) 2 cents; more than 3 cents and less than 4 cents 
B) more than 3 cents and less than 4 cents; more than 3 cents and less than 4 cents 
C) 1 cents; 2 cents 
D) 2 cents; either equal to 4 cents or more than 4 cents 
E) either equal to 4 cents or more than 4 cents; 2 cents

Quizplus · Accepted Answer

In perfect competition, price equals marginal cost, so the price is 2 cents. As a monopoly, the price is set above marginal cost, typically more than 3 cents and less than 4 cents.

-The Above Figure Shows the Market Demand Curve for Long-Distance