The following is a difference between a monopolist and a perfectly competitive firm:
A)output is maximized when MR =MC
B)at some point there will always be diminishing returns to the marginal input.
C)the marginal cost curve is usually U-shaped
D)at equilibrium price is usually higher than marginal cost

Question

Quizplus · Accepted Answer

D) at equilibrium price is usually higher than marginal cost.
In a perfectly competitive market, firms are price takers, meaning they have no control over the market price; it is determined by the intersection of the industry supply and demand curves. For a perfectly competitive firm, the equilibrium condition is where the price (P) equals marginal cost (MC), because the firm will continue to produce additional units as long as the revenue from selling those units (the price they receive) is greater than the cost of producing them. Therefore, in perfect competition, P = MC at equilibrium.
In contrast, a monopolist is a price maker with significant control over the market price due to the lack of competition. A monopolist will seek to maximize profits by producing at a quantity where marginal revenue (MR) equals marginal cost (MC). However, because the monopolist faces a downward-sloping demand curve, the price that consumers are willing to pay for the monopolist's output is higher than the marginal cost at the profit-maximizing quantity. This means that the monopolist can set a price that is above the marginal cost, leading to a higher equilibrium price compared to the price in a perfectly competitive market. This results in a deadweight loss to society, as there is underproduction and overpricing relative to the perfectly competitive outcome.
The other options provided do not specifically differentiate between a monopolist and a perfectly competitive firm:
A) "output is maximized when MR = MC" - This is a general principle of profit maximization that applies to both monopolists and perfectly competitive firms, although for perfectly competitive firms, MR is equal to the market price.
B) "at some point there will always be diminishing returns to the marginal input" - The law of diminishing returns is a general principle in economics that applies to all firms, regardless of market structure.
C) "the marginal cost curve is usually U-shaped" - The U-shaped marginal cost curve is a characteristic of firms in general due to increasing and then decreasing marginal returns to the variable input in the short run. It is not specific to either monopolists or perfectly competitive firms.

The Following Is a Difference Between a Monopolist and a Perfectly