Explain why a monopolist does not have a supply curve


Any firm, including a monopolist, has cost curves. For competitive firms marginal cost dictates supply, since the firm produces where P = MC. But the marginal cost curve does not dictate monopoly supply. The monopolist produces at MR = MC, where MR depends on the position of demand. Hence, two monopolists with similar costs could charge completely different prices, depending on the demand for their products. A monopolist chooses a profit-maximizing level of output, but it does not really have a supply curve, which indicates a collection of price-quantity combinations that it is willing to supply.

Economics

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Economics