Which of the following is not a significant difference between a monopolist and a competitive firm:...

Which of the following is not a significant difference between a monopolist and a competitive firm:

The monopolist produces where MR=MC while the perfect competitor does not.

A monopoly is a price-maker, whereas a competitive firm is a price-taker

A monopolist is protected by barriers to entry, whereas a competitive firm is not

The monopoly’s MR curve lies below the demand curve, whereas the competitive firm’s MR curve is horizontal at the market price

Expert Solution

In order to maximize profit any firm(Monopolist or perfect competitive firm) produces that quantity at which MR = MC. For a perfect competitive firm Price is decided by a market and thats why it is consider as price taker firm and charges constant price. Because of this constant price MR = d(P*Q)/dQ = P(dQ/dQ) = P. So MR is horizontal and equals P. Thus For a perfect competitive firm we have P = MR = MC which is same as monopolist but for monopolist MR is not equal P because demand faced by a monopolist is downward sloping. Thus Profit maximizing condition : MR = MC is same for both monopolist and hence is option (a) is the correct answer.

A monopolist is a only firm in the market and hence is a price maker. Monopoly Demand curve is downward sloping because of which MR is below Demand curve. Also Monopolies exist because of some barrier but in a perfect competitive industry there is free entry and exit. Hence, option (b) , (c) and (d) are incorrect.

Hence, the correct answer is (a) The monopolist produces where MR=MC while the perfect competitor does not.

Rahul Sunny answered 1 hour ago

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