A monopolist, unlike a perfect competitor, has total control in its market because it is the single producer. Why, then, must a single-price monopolist decrease its price if it wants to increase its output?
What will be an ideal response?
Because the monopolist does control the market, the monopolist sets the price at the maximum level that sells all the output the monopolist produces. This maximum price is determined from the demand for the product. The demand curve shows that the only way to increase the quantity consumers will buy is to lower the price. As a result, when a monopolist wants to produce more output, demanders will not buy the additional output at the initial price. As the demand curve indicates, in order to sell the extra production, the monopolist must lower its price.
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In the above table, the efficient level of output can be achieved through a per unit subsidy of
A) zero. B) $20. C) $60. D) $120.
Government spending in the United States has grown over time and now accounts for more than forty percent of United States national income. Does this mean that government has been consistently running a budget deficit?
What will be an ideal response?