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.

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