Which of the following describes perfect competition, but does NOT describe a monopoly?
A) Marginal revenue is equal to price.
B) Profits may exist in the short run.
C) The firm's average total cost curve is U-shaped.
D) A profit-maximizing firm chooses output where marginal revenue equals marginal cost.

Question

Quizplus · Accepted Answer

In perfect competition, price is determined by the market and each firm is a price taker, meaning marginal revenue equals the price. In a monopoly, the firm has control over the price and can set it above marginal cost, so marginal revenue does not necessarily equal price.

Which of the Following Describes Perfect Competition, but Does NOT