Which of the following is true for BOTH monopoly and a perfectly competitive firm?
A) The demand for the individual firm's product is perfectly elastic.
B) Economic profits can be sustained indefinitely over time.
C) The marginal revenue curve is horizontal at the market equilibrium price.
D) Profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost.

Question

Quizplus · Accepted Answer

Both monopoly and perfectly competitive firms maximize profits by producing at the level of output where marginal revenue equals marginal cost. However, the other options are false. In a monopoly, the demand for the individual firm's product is not perfectly elastic and economic profits can be sustained in the long run, while in a perfectly competitive firm, the demand for the individual firm's product is perfectly elastic and economic profits cannot be sustained in the long run. The marginal revenue curve in a monopoly is downward sloping, whereas in a perfectly competitive firm, the marginal revenue curve is horizontal at the market equilibrium price.

Which of the Following Is True for BOTH Monopoly and a Perfectly