Which of the following statements is false?
A)A competitive firm maximizes profit when marginal revenue equals marginal cost.
B)When a competitive firm increases output by one unit, revenue increases by an amount equal to market price.
C)A monopoly and a competitive firm use a similar rule for setting output to maximize profit.
D)When a monopoly increases output by one unit, revenue increases by an amount less than market price.
E)A monopoly maximizes profit when price equals marginal cost.

Question

Quizplus · Accepted Answer

A monopoly maximizes profit where marginal revenue equals marginal cost, not where price equals marginal cost. This is due to the downward-sloping demand curve a monopoly faces, which means that to sell more units, the price must decrease, affecting the revenue for all units sold.

Which of the Following Statements Is False