ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Control Pricing
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Controls Who makes it
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Both
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Neither
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Detailed explanation-1: -A monopoly is a market with only one seller. A monopolist is free to set prices or production quantities, but not both because he faces a downward-sloping demand curve. He cannot have a high price and a high quantity of sales – if he has a high price, people will buy less.
Detailed explanation-2: -The Monopolist’s Demand Curve and Marginal Revenue effect is stronger than the quantity effect: as the monopolist sells more, it now has to lower the price on many units of output, making the price effect very large.
Detailed explanation-3: -A monopoly occurs when a firm lacks any viable competition and is the sole producer of the industry’s product. Because a monopoly faces no competition, it has absolute market power and can set a price above the firm’s marginal cost.
Detailed explanation-4: -In monopolistic competition, supply and demand forces do not dictate pricing. Firms are selling similar, yet distinct products, so firms determine the pricing.
Detailed explanation-5: -Increased prices. When a single firm serves as the price maker for an entire industry, prices typically rise. Inferior products. Monopolistic firms have minimal incentive to improve the quality of the goods and services they provide. Price discrimination. 12-Oct-2022