Question

“Because a monopoly is the only source of supply, consumers are entirely at its mercy. There...

“Because a monopoly is the only source of supply, consumers are entirely at its mercy. There is no limit to the price the monopoly can charge.” Evaluate this statement.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Incorrect. Note that a monopoly does not face a perfectly inelastic demand but a demand curve that
slopes down. This is indicative of the fact that in order to sell more monopoly has to reduce its price. It
is true that it can charge a high price but not so much so that it looses out on sales. Consumers will
never buy if the price exceeds their willingness to pay. This WTP binds the monopolist as well. Hence
the limit to the price the monopoly can charge is imposed by WTP by the consumers and its own goal
of profit maximization.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
"A monopoly firm will charge an exorbitant price for its product.” Explain why this statement is...
"A monopoly firm will charge an exorbitant price for its product.” Explain why this statement is incorrect.
Question 6 A monopoly sells two products, of which any given consumer wants to buy only...
Question 6 A monopoly sells two products, of which any given consumer wants to buy only one (and places no value on the other good). If the monopoly can prevent resale, can it increase its profit by bundling the goods, forcing consumers to buy both goods?
1. Compared with a perfectively competitive market a monopoly is inefficient because                    a. it raises...
1. Compared with a perfectively competitive market a monopoly is inefficient because                    a. it raises the market price above marginal cost and produces a smaller output.             b. it produces a greater output but charges a lower price.             c. it produces the same quantity while charging a higher price.             d. all surplus goes to the producer.             e. it leads to a smaller producer surplus but greater consumer surplus. 2. The demand curve of a monopolist typically...
A firm's supply curve is upsloping because: consumers envision a positive relationship between price and quality....
A firm's supply curve is upsloping because: consumers envision a positive relationship between price and quality. the expansion of production necessitates the use of qualitatively inferior inputs. mass production economies are associated with larger levels of output. producers are incentivized to produce more output due to higher revenue potential
1. If a single-price monopoly wants to sell a great quantity of output it must.. a....
1. If a single-price monopoly wants to sell a great quantity of output it must.. a. raise its price b. simply produce more and sell it at the same price c. lower its price d. tell consumers to buy more because it's a monopolist 2. As output increases, marginal revenue... a. increases for a perfectly competitive firm b. is constant for a monopolistically competitive firm c. increases for a monopoly d. decreases for a perfectly competitive firm e. decreases for...
The supply curve is upward sloping because: as the price increases, the quantity supplied will fall....
The supply curve is upward sloping because: as the price increases, the quantity supplied will fall. as the price increases, the suppliers can earn higher levels of profit and hence increases the quantity supplied. as the price increases, consumers demand less. as the price increases, so do costs
In a figure, illustrate the case of a monopoly that is incurring an economic loss. Label...
In a figure, illustrate the case of a monopoly that is incurring an economic loss. Label the price the monopoly charges as P and the quantity the monopoly produces as Q. A perfectly competitive industry becomes a single-price monopoly and the industry’s costs do not change. Are consumers better or worse off with this change? Is society better or worse off with the change? Support your answers by drawing one figure that compares the price and quantity produced when the...
Optimal tax under monopoly supply. This problem asks you to solve an algebra problem for a...
Optimal tax under monopoly supply. This problem asks you to solve an algebra problem for a case where there is a negative externality and a second market distortion due to market power. There are many reasons why there might be another market failure or inefficiency that interacts with the externality. Albany-Berkeley Clinker (ABC), LLC is the monopoly provider of ready mix concrete in East Bay. The factory can produce a bag of concrete for a constant marginal cost of $2....
1.A firm is a pure monopoly when: a.it is the only seller of a unique product...
1.A firm is a pure monopoly when: a.it is the only seller of a unique product and barriers to entry prevent other sellers from entering the market in the long run. b.it is the only seller of a product that has very few close substitutes and entry into the market in the long run is unrestricted. c.there are only a few other very large firms selling similar products. d.it can sell all it can produce at any price it chooses....
2、Suppose a monopoly is facing two different types of consumers with inverse demand functions ?=200−?1 and...
2、Suppose a monopoly is facing two different types of consumers with inverse demand functions ?=200−?1 and ?=150−2?2. Monopoly cannot observe who belongs to which group. Monopoly’s marginal cost is zero and there is no fixed cost.（20 points） (1) Suppose the monopoly offers two options specifying quantity and total price. The first offer is targeted at consumer 1 with ?1=200 such that it makes consumer 1 indifferent between the two offers. The second offer is targeted at consumer 2 with ?2=75...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT