competitive firm—that is, by using total cost, fixed cost, variable cost, marginal cost, average cost, and average

variable cost. However, because a monopoly faces no competition, its situation and its decision process will

differ from that of a perfectly competitive firm. (The Clear It Up feature discusses how hard it is sometimes to

define “market” in a monopoly situation.)

Demand Curves Perceived by a Perfectly Competitive Firm and by a Monopoly

A perfectly competitive firm acts as a price taker, so we calculate total revenue taking the given market price

and multiplying it by the quantity of output that the firm chooses. The demand curve as it is perceived by a

perfectly competitive firmappears in Figure 9.3 (a). The flat perceived demand curve means that, from the

viewpoint of the perfectly competitive firm, it could sell either a relatively low quantity like Ql or a relatively

high quantity like Qh at the market price P.
222 9 • Monopoly
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