-The above figure shows the market demand curve for long-distance land-based telephone calls.Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry.If the firms in the industry operate as perfect competitors,the price of a call is ________ per minute and if the firms in the industry operate as a monopoly,the price of a call is ________ per minute.
A) 2 cents; more than 3 cents and less than 4 cents
B) more than 3 cents and less than 4 cents; more than 3 cents and less than 4 cents
C) 1 cent; 2 cents
D) 2 cents; either equal to or more than 4 cents
E) either equal to or more than 4 cents; 2 cents

Question

-The above figure shows the market demand curve for long-distance land-based telephone calls.Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry.If the firms in the industry operate as perfect competitors,the price of a call is ________ per minute and if the firms in the industry operate as a monopoly,the price of a call is ________ per minute.
A) 2 cents; more than 3 cents and less than 4 cents 
B) more than 3 cents and less than 4 cents; more than 3 cents and less than 4 cents 
C) 1 cent; 2 cents 
D) 2 cents; either equal to or more than 4 cents 
E) either equal to or more than 4 cents; 2 cents

Quizplus · Accepted Answer

In perfect competition, price equals marginal cost, so the price would be 2 cents per minute. As a monopoly, the firm would set a higher price to maximize profit, which would be more than 3 cents and less than 4 cents per minute, according to the demand curve.

-The Above Figure Shows the Market Demand Curve for Long-Distance