ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The monopolist can set price and output
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The monopolist can make supernormal profits in the short run and long run
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The demand curve for the firm and the market are the same
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The monopolist protect their position through barriers to entry
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Detailed explanation-1: -A monopoly is a kind of market structure that is controlled by a single seller. A monopolist is known as a price taker since the monopolist can set the market (P) price. Therefore the monopolist can take decisions with respect to determining the market P and the corresponding level of output.
Detailed explanation-2: -Answer and Explanation: The answer to this question is (a) A monopoly charges a higher price and produces a lower output level than if the market were competitive.
Detailed explanation-3: -Analyzing choices is a more complex challenge for a monopoly firm than for a perfectly competitive firm. After all, a competitive firm takes the market price as given and determines its profit-maximizing output. Because a monopoly has its market all to itself, it can determine not only its output but its price as well.
Detailed explanation-4: -Monopolies have the ability to limit output, thus charging a higher price than would be possible in competitive markets. Unlike a competitive company, a monopoly can decrease production in order to charge a higher price.
Detailed explanation-5: -A monopolist can determine its profit-maximizing price and quantity by analyzing the marginal revenue and marginal costs of producing an extra unit. If the marginal revenue exceeds the marginal cost, then the firm should produce the extra unit.