A monopoly, unlike a perfect competitor, has total control in its market because it is the single producer. Why, then, must a single-price monopoly decrease its price if it wants to increase its output?
What will be an ideal response?
Because the monopoly does control the market, the monopoly sets the price at the maximum level that sells all the output the monopoly produces. This maximum price is determined from the demand for the product. The downward sloping market demand curve shows that the only way to increase the quantity consumers will buy is to lower the price. As a result, when a monopoly wants to produce more output, demanders will not buy the additional output at the initial price. As the downward sloping demand curve indicates, in order to sell the extra production, the monopolist must lower its price.
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When are demanders satisfied and suppliers unsatisfied?
a. Never-neither suppliers nor demanders are ever completely happy with the market price. b. Whenever the market price is above its equilibrium level. c. When the market price is relatively low, because then demanders can buy all they want but suppliers cannot make a profit. d. When rises in supply cause a fall in the equilibrium price of the good.
Assets minus liabilities equal:
A. current income minus spending on current needs. B. wealth. C. saving. D. investment.
If average variable costs are increasing while average total costs are decreasing, then
A. fixed costs must be zero. B. marginal cost must lie between average variable and average total costs. C. marginal cost must equal average variable cost. D. marginal cost must equal average total cost.
Refer to the graphs. These production possibilities curves:
A. demonstrate that there can be gains from specialization and trade between the two nations.
B. reflect the law of increasing opportunity costs.
C. reflect the law of diminishing marginal utility.
D. imply that specialization will be incomplete.