Which of the following is a characteristic of a monopoly but NOT of a competitive market? A) A monopoly contains many firms. B) price marginal cost C) price

Question

Which of the following is a characteristic of a monopoly but NOT of a competitive market?
A) A monopoly contains many firms.
B) price > marginal cost
C) price < marginal cost
D) price = marginal cost
E) A monopoly is a price-taker.

Quizplus · Accepted Answer

In a competitive market, prices are determined by the forces of supply and demand which ensures that price = marginal cost. However, monopolies have market power and can set prices higher than marginal cost in order to maximize profits. Therefore, price > marginal cost is a characteristic of a monopoly but not a competitive market. The other options are either not true for a monopoly (A, E) or true for both monopoly and competitive markets (C, D).

Which of the Following Is a Characteristic of a Monopoly