Which of the following statements about price and marginal cost in competitive and monopolized markets is true ?
Correct answer: A. In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost.
- A. In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost.
- B. In competitive markets price equals marginal cost, in monopolized markets price equals marginal cost
- C. In competitive markets price exceeds marginal cost, in monopolized markets price exceeds marginal cost
- D. In competitive markets price exceeds marginal cost in monopolized markets price equals marginal cost
Explanation
A competitive firm takes price as given and produces where price equals marginal cost. A monopolist faces downward-sloping demand, so its profit-maximizing condition gives price above marginal cost.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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