"Being the only seller in the market, the monopolist can choose any price and quantity it desires." Evaluate this statement: Is it true or false? Explain your answer
What will be an ideal response?
The statement is false. The monopolist cannot choose both the price and quantity. The monopolist has some market power and therefore has some ability to affect market price but it does not control the demand curve. If the monopolist sets a price, the quantity sold will be indicated by the demand curve.
You might also like to view...
To induce an agent to work hard, a principal may offer the agent a bonus, in other words, an extra payment if a performance target is hit
Suppose that the agent's performance is affected by factors beyond the agent's control, for example umbrellas are demanded more on a rainy day. Under what conditions may the bonus not induce the agent to work harder? A) The agent is very risk averse. B) The agent is very risk loving. C) The agent is risk neutral. D) The principal is risk neutral.
A monopolist's profit-maximizing level of output occurs where:
a. marginal revenue equals marginal cost. b. price equals marginal cost. c. average total cost is at a minimum. d. price equals average revenue.