Which of the following statements regarding monopoly and perfectly competitive markets are correct? a. In a...

Which of the following statements regarding monopoly and perfectly competitive markets are correct?

	a.	In a monopoly market, the firm is a price-maker.
	b.	In a perfectly competitive market, firms invest in research and innovation.
	c.	In a perfectly competitive market, there is little advertising.
	d.	In a monopoly market, owners receive no economic rent.

Solutions

Expert Solution

The right answer is option A and option C. As we know, a monopolist is a single seller to the market and a monopolist has a full control over the price level, therefore, we can say that a monopoly firm is a price maker. On the other hand, there are so many sellers in the perfect competition which implies firms in the perfect competition are price taker which leaves less incentive for them to invest in the advertisement, therefore, there is a little advertising in the perfect competition.

Rahul Sunny answered 1 year ago

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