The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 10.2

-The firm described in Table 10.2:
A)must be a monopoly firm.
B)must be a perfectly competitive firm.
C)cannot be a perfectly competitive firm.
D)has no market power.
E)cannot be a monopoly.

Question

The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 10.2
 
-The firm described in Table 10.2:
A)must be a monopoly firm. 
B)must be a perfectly competitive firm. 
C)cannot be a perfectly competitive firm. 
D)has no market power. 
E)cannot be a monopoly.

Quizplus · Accepted Answer

The table shows that the price charged by the firm is higher than its marginal cost for all levels of output. This indicates that the firm has some market power and is not a price taker, which is a characteristic of perfect competition. Therefore, answer choices A and B can be eliminated. However, the firm does not have complete market power as it cannot charge a price significantly above its marginal cost without losing all its customers. Therefore, it is not a monopoly and answer choice E can also be eliminated. The best answer is therefore C, which states that the firm cannot be a perfectly competitive firm. Additionally, since the firm has some market power, it can be concluded that it has at least some control over the market price and hence has some market power, making answer choice D incorrect.

The Table Given Below Shows the Price Charged by a Firm