The MR = MC rule
A) applies only to pure competition.
B) applies only to pure monopoly.
C) does not apply to pure monopoly, because price exceeds marginal revenue.
D) applies both to pure monopoly and pure competition.

Question

Quizplus · Accepted Answer

The MR = MC rule applies to both pure monopoly and pure competition. In pure competition, price equals marginal revenue and in pure monopoly, price exceeds marginal revenue, but the firm still maximizes profit by producing the quantity where marginal revenue equals marginal cost. Therefore, the MR = MC rule is applicable to both market structures.

The MR = MC Rule