What is true at the profit-maximizing quantity for a perfectly competitive firm but not for a nondiscriminating monopoly?
A)Price equals marginal cost.
B)Price is greater than marginal cost.
C)Marginal revenue equals marginal cost.
D)Marginal revenue is less than marginal cost.
E)Marginal revenue is greater than average revenue.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the profit-maximizing quantity occurs when price equals marginal cost (P=MC). This is because all firms are price takers and therefore must accept the market price. However, in a nondiscriminating monopoly, the profit-maximizing quantity occurs when marginal revenue equals marginal cost (MR=MC), which will result in a higher price than in a perfectly competitive market. This is because the monopoly has some market power and can raise the price to increase profits. Therefore, choice A is true for a perfectly competitive firm but not for a nondiscriminating monopoly.

What Is True at the Profit-Maximizing Quantity for a Perfectly