A big difference between a competitive firm and a monopolist is that a monopolist
A) does not charge a price equal to marginal revenue.
B) does not set marginal revenue equal to marginal cost to maximize profits.
C) does not try to maximize profits.
D) can always make positive economic profits.
E) cannot set its price at the market price.

Question

Quizplus · Accepted Answer

A monopolist does not charge a price equal to marginal revenue because in order to maximize profits, a monopolist sets quantity where marginal revenue equals marginal cost, but then charges a price based on the demand curve rather than the marginal cost curve. Therefore, the price charged will always be higher than marginal revenue.

A Big Difference Between a Competitive Firm and a Monopolist