Asked by Amarjeet Jayanthi on Jun 18, 2024
Verified
The monopolist
A) is a perfect competitor.
B) has a horizontal demand curve.
C) produces where MC equals MR.
D) None of the choices are correct.
MC Equals MR
In economics, the condition where a firm's marginal cost equals its marginal revenue is considered the optimal point for profit maximization.
Horizontal Demand
Horizontal Demand describes a market condition where the demand for a product is exceedingly elastic, indicating that a slight change in price can lead to a significant change in the quantity demanded.
- Compare and contrast the pricing and output approaches of monopolies with those of perfect competition.
Verified Answer
RA
rossy almeidaJun 21, 2024
Final Answer :
C
Explanation :
A monopolist has the power to set its price and therefore faces a downward sloping demand curve, leading to a marginal revenue curve that is below the demand curve. To maximize profits, a monopolist produces where marginal cost (MC) equals marginal revenue (MR), which will occur at a lower quantity and higher price than under perfect competition. Therefore, the correct answer is (C). (A) is incorrect because a monopolist is the opposite of a perfect competitor. (B) is incorrect because a monopolist's demand curve is downward sloping. (D) is incorrect because (C) is the correct answer.
Learning Objectives
- Compare and contrast the pricing and output approaches of monopolies with those of perfect competition.