Question

who is a monopolist? How the change in cost effect the monopolist's equilibrium price and quantity?

who is a monopolist? How the change in cost effect the monopolist's equilibrium price and quantity?

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Answer #1

A monopolist is a firm that enjoys complete market power. The monopolist firm is the only supplier of a particular good and has price-setting power. The monopolist produces at a point where the marginal revenue = marginal cost such that the profits are maximized.

The effect of the change in costs depends on the type of cost being changed. If it is the fixed cost that is changing, the output and price of the monopolist form remain the same as fixed costs, once paid, are sunk costs, and do not affect the decisions. On the other hand, variable costs affect the pricing and output decision. For instance, if there is an increase in the variable cost, the marginal cost will increase and the firm will produce a lower output at a higher price.

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