Q344
The degree of monopoly power is measured in terms of difference between
A.
Marginal cost and the price
AnswerB.
Marginal cost and average revenue
C.
Marginal cost and average cost
D.
Marginal revenue and average cost
Answer: Option A
Solution
Answer: Option A
Solution:
The degree of monopoly power is measured in terms of difference between Marginal cost and the price. In a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit.