The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 24.2
The firm described in Table 24.2:
A)must be a monopoly firm.
B)must be a perfectly competitive firm.
C)cannot be a perfectly competitive firm.
D)has no market power.
E)cannot be a monopoly.

Question

The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 24.2
 The firm described in Table 24.2:
A)must be a monopoly firm. 
B)must be a perfectly competitive firm. 
C)cannot be a perfectly competitive firm. 
D)has no market power. 
E)cannot be a monopoly.

Quizplus · Accepted Answer

The fact that the marginal cost is increasing with the level of output suggests that the firm is facing diminishing marginal returns to labor and capital, which is a characteristic of firms in imperfectly competitive markets. Therefore, the firm cannot be a perfectly competitive firm. However, we cannot determine whether it is a monopoly or has market power based on this information alone.

The Table Given Below Shows the Price Charged by a Firm