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Competitive firms and monopolists differ in which of the following ways? a
Competitive firms and monopolists differ in which of the following ways?
a. A competitive firm cannot choose i level of output, a monopolist chooses its level of output.
b. A competitive firm's short-run profit is always zero; a monopolist can have a positive short-run profit.
c. A competitive firm's marginal revenue curve is horizontal; a monopolist?s marginal revenue curve is downward sloping.
d. All of the above are correct.
Expert Solution
The answer is c. A competitive firm's marginal revenue curve is horizontal; a monopolist's marginal revenue curve downward sloping because the competitive firm's marginal revenue is constant and equal to the price level whereas, in a monopoly market, the price is charged higher than the marginal revenue, therefore, the curve is downward sloping. Option A is incorrect because a competitive firm can choose its level of output but cannot choose its price level. Option b is also incorrect because a competitive firm's short-run profit is not zero and a competitive firm can earn a positive economic profit in the short-run.
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