At the profit-maximizing level of output,price is ________ marginal cost for a perfectly competitive firm and price is ________ marginal cost for a monopolist.
A) equal to; greater than
B) equal to; less than
C) equal to; equal to
D) greater than; equal to

Question

Quizplus · Accepted Answer

In perfect competition, firms are price takers and cannot influence the market price. Therefore, they will produce at the point where marginal cost equals price (MC=P) to maximize profit. 
In contrast, monopolists can control the market price by limiting output. They will produce where marginal cost equals marginal revenue (MC=MR) to maximize profit. However, since marginal revenue is always less than the price in a monopolistic market, price will be greater than marginal cost.

At the Profit-Maximizing Level of Output,price Is ________ Marginal Cost