Suppose Both a Monopolist and a Perfectly Competitive Firm Are

question 28

Multiple Choice

Suppose both a monopolist and a perfectly competitive firm are producing in their respective markets at a point where marginal cost is $8 and marginal revenue is $10. What should the profit-maximizing firms do?

• A) Both the monopolist and the perfectly competitive firm should increase output until MC = MR.
• B) Both the monopolist and the perfectly competitive firm should decrease output until MC = MR.
• C) The monopolist should increase output but the perfectly competitive firm should shut down.
• D) The monopolist should keep producing at this level but the perfectly competitive firm should decrease output until MC = MR.

---

Definitions:

Reactivity

The inclination of a material to participate in chemical changes, alone or in combination with other elements, leading to the liberation of energy.

Chlorine

A highly reactive, greenish-yellow gaseous element used in water purification and the production of numerous chemicals.

Aluminum Chloride

A chemical compound with the formula AlCl3, widely used in the chemical industry as a catalyst and as a component in a variety of chemical reactions.

O,p-director

Substituents in aromatic substitution reactions that direct incoming substituents to the ortho and para positions relative to themselves.