question archive Which of these is a key difference between a perfectly competitive firm and a monopolist that does not practice price discrimination: a

Which of these is a key difference between a perfectly competitive firm and a monopolist that does not practice price discrimination: a

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Which of these is a key difference between a perfectly competitive firm and a monopolist that does not practice price discrimination:

a. The marginal cost curve is U-shaped for a perfectly competitive firm but not for a monopolist,

b. Price is equal to average revenue for a perfectly competitive firm in equilibrium but not for a monopolist,

c. Price is equal to marginal revenue for a perfectly competitive firm in equilibrium but not for a monopolist,

d. The average revenue curve is the demand curve for a perfectly competitive firm but not for a monopolist,

e. A monopolist aims to maximize profits, while a perfectly competitive firm tries to maximize total revenue.

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The correct answer is c. Price is equal to marginal revenue for a perfectly competitive firm in equilibrium but not for a monopolist.

A monopolist determines the price when the marginal revenue is equal to the marginal cost. The average revenue curve represents the demand curve for a firm and it is used to estimate the price. In order to earn a maximum economic profit, marginal revenue is set equal to the marginal cost by a monopolist and the price is higher than the marginal revenue. On the other hand, a perfectly competitive firm sets the price equal to the marginal cost as well as the marginal revenue,