Final answer:
The student should choose option 2) marginal revenue; marginal cost, as both monopolists and perfectly competitive firms maximize profits by producing where marginal revenue equals marginal cost.
Step-by-step explanation:
Similar to a firm operating in a perfectly competitive industry, a monopolist that chooses to produce in the short-run will produce that level of output where marginal revenue exceeds marginal cost by the greatest amount. The correct option is therefore 2) marginal revenue; marginal cost.
A perfectly competitive firm maximizes profits where marginal revenue (MR) is equal to marginal cost (MC). This is also true for a monopoly, however, their MR does not equal the price due to the monopolist's ability to set prices. In both market structures, producing where MR equals MC maximizes profit because it's the level of output where producing one more unit brings in revenue exactly equal to the cost of producing that unit. Producing less than this quantity would mean missing out on profitable opportunities, while producing more would add more to costs than revenues, reducing profits.