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.

Economics

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Income inequality in the United States has increased somewhat over the past 25 years. Two factors that appear to have contributed to this are

A) rapid technological change and expanding international trade. B) strong economic growth and low inflation. C) tax cuts on high-income individuals and large increases in prices of stocks. D) outsourcing of jobs by U.S. firms and cuts in taxes on capital gains.

Economics

When buying a car from a commission salesman you improve your bargaining position by

a. shopping when the new model year cars have just arrived b. shopping when the showroom is full of customers c. shopping when the car lot has many cars left unsold d. shopping toward the beginning of the month

Economics

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

A) A decline in the rate of interest. B) An unintended accumulation of inventories by businesses. C) A rise in the real GDP. D) The federal budget will automatically move toward a deficit.

Economics

Between 1950 and 2012, U.S. real GDP per capita grew at an average annual rate of about:

A. 5.5 percent. B. 4.2 percent. C. 3.2 percent. D. 2.0 percent.

Economics