Question

The demand curve facing a monopolist is:

Multiple Choice

• downward sloping, the same as that facing a perfectly competitive firm.

• horizontal, the same as that facing a perfectly competitive firm.

• upward sloping, the same as that facing a perfectly competitive firm.

• downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

Answer 1

The demand curve which a monopolist faces is downward sloping because a monopolist is a price setter, so for selling an additional unit of output, a monopolit has to reduce the price while in the pefect competition the price is set by the industry and not by the firms. So firm has to accept whatever price is given. Hence the demand curve of perfect competive firm will be horizontal line.

Hence it can be said that the demand curve facing a monopolist is downward sloping, unlike the horizontal demand curve facing a pefectly competitive firm.

Hence option fourth is the correct answer.

Option fourth; downward sloping, unlike the horizontal demand curve facing a pefectly competitive firm.