Question

Question 3

Which of the following is true about a monopoly?

		Its demand curve is generally less elastic than in more competitive markets.
		It will always earn economic profit.
		It will always be subject to government regulation.
		It will always produce the same as a perfectly competitive firm.
		None of the above are true.

Answer 1

For Monopoly the demand curve is less elastic than the competitive markets because the Monopoly has a demand curve negatively sloping and the competitive market demand curve is horizontal of the elasticity of demand of perfectly competitive market is infinity why the Monopoly has some value very less than infinity because it is downward sloping curve and therefore the first statement is true

(a) is the answer

the second statement is wrong because if the fixed cost is very high then the average total cost would be higher than the price as a result of which will not an economic profit and sometimes Monopoly is referred to as good for the society as a result of which the government might or might not impose a regulation and it will produce less than that of perfectly competitive firm because the price will be higher so that it can an positive profits

Therefore (b,c,d,e) is the answer to this question