Which of the following is TRUE of a perfectly competitive firm and a monopoly in the long run?
A) P = MC
B) P = ATC
C) MR = MC
D) P = MR

Question

Quizplus · Accepted Answer

In the long run, both perfectly competitive firms and monopolies will produce where MR (marginal revenue) equals MC (marginal cost) in order to maximize profits. However, since monopolies have market power and face a downward sloping demand curve, their MR will always be less than the price they charge (P). Therefore, if a monopoly produces where MR = MC, they will charge a price higher than their marginal cost, whereas a perfectly competitive firm will charge the price where P = MC. Thus, option C, where MR = MC, is the only true statement for both perfectly competitive firms and monopolies in the long run.

Which of the Following Is TRUE of a Perfectly Competitive