An important difference between a perfectly competitive firm and a monopolist is
A) the size of the industry.
B) the primary objective of the firms.
C) a monopolist only produces in the long run, while a perfect competitor only produces in the short run.
D) the price it charges to sell additional units of a good.

Question

Quizplus · Accepted Answer

A monopolist has market power and can control the price of the good it sells, while a perfectly competitive firm has no market power and must accept the market price. Therefore, a monopolist can charge a higher price to sell additional units of the good, whereas a perfectly competitive firm is a price taker and must accept the market price for all units sold. The size of the industry and the primary objectives of the firms may differ between the two market structures, but these are not defining differences between a monopolist and a perfectly competitive firm. The statement about long-run and short-run production is also not accurate for both market structures, as both can produce in both the short run and the long run.

An Important Difference Between a Perfectly Competitive Firm and a Monopolist