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JAMB Economics 1986 Question 20

Question 20

Market Structures

One major difference between monopoly and perfect competition is that

  1. A.the perfect competitor is a price taker while the monopolist determines his own output
  2. B.homogeneity of purpose exists for the perfect competitor while non-homogeneity of purpose exists for the monopolist
  3. C.sellers are located all over the world in the case of perfect competition but sellers are located only in one country monopolist
  4. D.there is free entry and exit in perfect competition but no free exit in monopoly
Show the answer and explanation

Answer: A (the perfect competitor is a price taker while the monopolist determines his own output)

Explanation

A perfectly competitive firm must accept the market price, while a monopolist, as the only seller, can set its own output (and so its price).