MARKET FORMS

July 2018, Paper-II
Question
Which of the following will be true for both monopoly and monopolistic competition in the short run?
a) Price is greater than marginal revenue
b) Price is equal to marginal revenue
c) Price is equal to marginal cost
d) Price is equal to the average cost
Answer A
A market structure characterized by a single seller, selling a unique product in the market is called a monopoly. Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another. In the short run, both under monopoly and monopolistic competition, the firm can enjoy super-normal profits, normal profits or can sustain losses. But in the long run, the firm under monopolistic competition will enjoy only normal profits.