Which of the following is true for both a monopolist and a perfectly competitive firm when each is maximizing profit?
A) Price equals marginal costs.
B) Marginal revenue is less than price.
C) Marginal revenue is equal to marginal cost.
D) all of the above

Question

Quizplus · Accepted Answer

Both a monopolist and a perfectly competitive firm maximize profit by producing the quantity where marginal revenue equals marginal cost. This is because at this point, the additional revenue generated by producing one more unit (marginal revenue) is equal to the additional cost of producing one more unit (marginal cost), so there is no further increase in profit by producing more or less than this quantity. Therefore, the statement that marginal revenue is equal to marginal cost is true for both types of firms when each is maximizing profit. The statement that price equals marginal cost is not necessarily true for a monopolist, as they have some market power and can charge a price above marginal cost. The statement that marginal revenue is less than price is true only for a monopolist, as they must lower their price to sell additional units and this reduces the marginal revenue they earn on each unit.

Which of the Following Is True for Both a Monopolist