Question 18
Market StructuresAt equilibrium, one of the distinctive features of monopoly compared with perfect competition is that in the former
- A.price is always equal to marginal cost
- B.supply is always equal to demand
- C.price is always higher than marginal cost
- D.there are always many buyers and many sellers
Show the answer and explanation
Answer: C (price is always higher than marginal cost)
Explanation
A monopolist's marginal revenue is below price, so at MC = MR the price is above marginal cost; in perfect competition P = MC.