m 3_summer 2_2018- Requires Respondus LockDown Browser : Jul 31 at 1:34pm z Inst

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m 3_summer 2_2018- Requires Respondus LockDown Browser : Jul 31 at 1:34pm z Instructions Question 11 st and a perfectly competitive frm have the same cost curves. The monopolistic firm would: O charge a higher price than the perfectly competitive firm charge the same price as the perfectly competitive firm. O refuse to operate in the short run unless an econoensc profit could be made charge a lower price than the perfectlhy competitive firm. O refuse to operate in the short run if an eccnomic loss was present Previous

Explanation / Answer

charge a higher price than the perfectly competitive firm.

Because monopolistic firms faces downward sloping demand curve in contrast to horizontal demand curve faced by perfectly competitive firm. Due to downward sloping demand curve, the price is higher than marginal revenue and marginal cost (MR=MC). But a perfectly competitive firm has peice equal to MR and thus MC

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