Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?
A)monopoly only
B)monopoly and monopolistic competition only
C)monopoly, monopolistic competition, and perfect competition
D)The answer cannot be determined without knowing whether the market is in the long run or short run.

Question

Quizplus · Accepted Answer

In both monopoly and monopolistic competition, firms have some market power, allowing them to set prices above marginal cost. In perfect competition, firms are price takers and cannot charge above marginal cost.

Consider Monopoly, Monopolistic Competition, and Perfect Competition