Which of the following statements is correct for both a monopolist and a perfectly competitive firm? (i)
The firm maximizes profits by equating marginal revenue with marginal cost.
(ii)
The firm maximizes profits by equating price with marginal cost.
(iii)
Demand equals marginal revenue.(iv)
Average revenue equals price.
A)(i), (iii), and (iv) only
B)(i) and (iv) only
C)(i), (ii), and (iv) only
D)(i), (ii), (iii), and (iv)

Question

Quizplus · Accepted Answer

Both monopolists and perfectly competitive firms maximize profits by equating marginal revenue with marginal cost (i). For both types of firms, average revenue equals price (iv). However, only perfectly competitive firms equate price with marginal cost (ii) and have demand equal to marginal revenue (iii).

Which of the Following Statements Is Correct for Both a Monopolist