The table given below shows the price charged by a firm and the marginal cost incurred by it for different levels of the output.Table 11.2

-The firm described in Table 11.2:
A)cannot be a monopoly.
B)must be a perfectly competitive firm.
C)cannot be a perfectly competitive firm.
D)cannot be a monopolistically competitive firm.
E)must be a duopolist.

Question

The table given below shows the price charged by a firm and the marginal cost incurred by it for different levels of the output.Table 11.2
 
-The firm described in Table 11.2:
A)cannot be a monopoly. 
B)must be a perfectly competitive firm. 
C)cannot be a perfectly competitive firm. 
D)cannot be a monopolistically competitive firm. 
E)must be a duopolist.

Quizplus · Accepted Answer

The fact that the price charged by the firm is greater than the marginal cost incurred implies that the firm has some degree of market power and is not a price taker, which means it cannot be a perfectly competitive firm. Monopolies and monopolistically competitive firms have market power but their marginal cost curves do not always intersect their demand curves at the same level of output, so they can charge higher prices than their marginal costs. Therefore, the best choice is that the firm cannot be a perfectly competitive firm.

The Table Given Below Shows the Price Charged by a Firm