A monopoly firm is different from a perfectly competitive firm in that
A)there are many substitutes for the monopolist's product,whereas there are no close substitutes for the perfectly competitive firm's product.
B)the monopolist's demand curve is perfectly inelastic,whereas the perfectly competitive firm's demand curve is perfectly elastic.
C)the monopolist can influence price in the market,whereas the perfectly competitive firm is a price taker.
D)All of these choices are true.

Question

Quizplus · Accepted Answer

A monopoly firm can influence price in the market because it is the sole producer of the product, while a perfectly competitive firm is a price taker because it has no control over the price and must accept the market price. Choice A is incorrect because a monopoly firm typically does not have close substitutes, which is why it has market power, while a perfectly competitive firm has many close substitutes. Choice B is incorrect because the demand curve for a monopoly firm is downward sloping, but not perfectly inelastic, while the demand curve for a perfectly competitive firm is perfectly elastic.

A Monopoly Firm Is Different from a Perfectly Competitive Firm