Chapter 61, Problem 6MCQ

To determine

The commonality between a monopolist and a perfectly competitive firm.

Answer to Problem 6MCQ

(c) Can earn profit in long run.

Explanation of Solution

A monopolist and a perfectly competitive firm both can earn profit in the long run because in long run both utilize their resources efficiently and have no wastage of resources. Hence, option (c) is correct.

A monopolist faces a downward-sloping demand curve but a perfectly competitive firm faces a horizontal demand curve.

A monopolist has a marginal cost curve below the demand curve but in a perfectly competitive firm demand curve is the same as the marginal revenue curve. Hence, option (b) is incorrect.

A monopolist has a downward-sloped marginal revenue curve and a perfectly competitive firm has a horizontal marginal revenue curve. Hence, option (d) is incorrect.

A monopolist profit-maximizing output level at MR=MC, but a perfectly competitive firm’s maximizing output level at P=MC. Hence, option (e) is incorrect.

Economics Concept Introduction

In a perfectly competitive market, the marginal revenue curve is the marginal cost curve and price line as well, and the demand curve is horizontal. In a monopolist, the demand curve is downward sloping, and the marginal revenue curve is downward sloping and remain below the demand curve.