Identify the truthfulness of the following statements.
I. A monopolist faces a downward-sloping demand curve, whereas a perfectly competitive firm faces a horizontal demand curve.
II. A monopolist maximizes profit, whereas a perfectly competitive firm cannot.

Question

Identify the truthfulness of the following statements. 
I. A monopolist faces a downward-sloping demand curve, whereas a perfectly competitive firm faces a horizontal demand curve.
II. A monopolist maximizes profit, whereas a perfectly competitive firm cannot.

Quizplus · Accepted Answer

I is true - A monopolist has market power and is the sole supplier of a product, so it can raise price and see a decrease in quantity demanded. A perfectly competitive firm, on the other hand, is a price taker and faces a horizontal demand curve because it can sell as much as it wants at the market price.
II is false - A perfectly competitive firm maximizes profit at the point where marginal cost equals the market price, while a monopolist maximizes profit at the point where marginal revenue equals marginal cost.

Identify the Truthfulness of the Following Statements