Which statement is TRUE?
A)A monopoly firm is a price maker.
B)MR = P if the demand curve is downward sloping.
C)MR = MC is a profit-maximizing rule for firms in perfect competition only.
D)Monopolies tend to charge lower prices than do perfectly competitive firms.

Question

Quizplus · Accepted Answer

A monopoly firm has significant market power, allowing it to set its own prices rather than reacting to market forces. This makes it a price maker. In contrast, firms in perfect competition are price takers, meaning they have no control over the market price and must accept whatever price the market sets. Option B is incorrect as MR = P only when the demand curve is perfectly elastic. In most cases, the demand curve is downward sloping, which means that MR < P. Option C is incorrect as the profit-maximizing rule of MR = MC applies to all firms, not just those in perfect competition. Option D is incorrect as monopolies tend to charge higher prices than perfectly competitive firms due to their market power.

Which Statement Is TRUE