The Fundamental Difference Between a Perfectly Competitive and Monopolistic Profit

question 29

Multiple Choice

The fundamental difference between a perfectly competitive and monopolistic profit maximization problem is that, in a competitive market MR:

• A)diminishes as quantity increases while in a monopoly it is fixed.
• B)is fixed while in a monopoly it diminishes as quantity increases.
• C)increases as quantity increases while in a monopoly it is fixed.
• D)diminishes as quantity increases while in a monopoly it increases.

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Definitions:

Federal Payroll Tax

Taxes imposed by the federal government on the wages of employees, which fund social security and Medicare programs.

Equilibrium Price

The value at which there is a perfect match between how much of a good or service is wanted and how much is provided, leading to a state of market equilibrium.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where the quantity supplied equals the quantity demanded.

Progressive Income Tax

A tax system in which the tax rate increases as the taxable income increases, aiming to distribute the tax burden more equitably.