How is monopoly different from perfect competition?

A.In a monopoly, there is only one seller, who can set prices as he chooses. In perfect competition,firms have some control over prices, but not as much as monopoly..

B.In a monopoly, there is only one seller, who can set prices as he chooses. In perfect competition,firms are price takers.

C.In a monopoly, there is more than one seller, but they can set prices as they choose.In perfect competition, firms are price makers.

D.In a monopoly, they are always protected by government barriers, whereas in a perfectively competitivecompany, they have no such protection.


Answer is B. In a monopoly, there is only one seller, who can set prices as he chooses. In perfect competition (also called perfect market conditions) a firm is a price taker because other firms can enter the market easily and produce a product that is indistinguishable from every other firm's product. This makes it impossible for any firm to set its own prices.

Economics

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In the absence of externalities, which of the following is true of economic efficiency?

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