Question

Which of the following conditions holds for a monopolist, but not for a perfect competitor, at the profit-maximizing level of output?

Question 7 options:

a) Price> marginal cost.
b) Marginal revenue= marginal cost.
c) Profit = (AR-ATC) x Q.
d) Price = average revenue.

Answer 1

a) Price> marginal cost.

Step-by-step explanation:

A monopoly is when there is only one firm operating in an industry. A monopoly sets the market price for its products.

A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Firms in a perfect competition are price takers, they accept the prices set by the forces of demand and supply.

In a monopoly, Price> marginal cost because the marginal revenue curve is always below the demand curve . This makes a monopoly to always earn economic profit.

In a perfect competition, price = marginal cost. A perfect competition doesn't earn economic profit in the long run.

I hope my answer helps you