Question

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximizing outputs?

		Marginal revenue is less than price.
		Marginal revenue equals marginal cost.
		Price equals marginal cost.
		Average revenue equals average cost.

Answer 1

Answer : The answer is option A.

For monopolist the demand is double of marginal revenue. At profit maximizing output level for monopolist the marginal revenue equal to marginal cost occur. But for monopolist the price level depends on demand at profit maximizing output level. As for monopolist the marginal revenue is the half of demand and price depends on demand hence for monopolist at profit maximizing output level the price is higher than the marginal revenue. But for perfectly competitive firm at profit maximizing output level, price = marginal revenue = average revenue = marginal cost occur. Therefore, option A is correct.