Which of the Following Statements Accurately Describes a Difference Between

question 44

Multiple Choice

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is a competitive price taker?

• A) Marginal revenue and market price are equal for the competitive price taker but not for the monopolist.
• B) The monopolist does not always produce the output that equates marginal cost and marginal revenue; the competitive price taker does.
• C) The monopolist charges the highest price possible; the competitive price taker charges a price equal to its per-unit cost.
• D) A monopolist can earn economic profit in the short run; a competitive price taker cannot.

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Definitions:

Weighted Average Cost of Capital

A calculation of a firm's cost of capital that weights each category of capital proportionally, including equity and debt.

Market Price

The current value at which an asset or service can be bought or sold in the marketplace.

Financial Leverage

Taking on borrowed money to magnify the possible profits of an investment.

EBIT

Profitability metric that disregards interest and income tax expenses, known as earnings before interest and taxes.