A monopolist is a: Price taker Price maker Efficient firm Firm with high consumer welfare

A monopolist is a:

		Price taker
		Price maker
		Efficient firm
		Firm with high consumer welfare

Solutions

Expert Solution

Answer- Price maker

A monopolist is a price maker. When an individual firm has market power to influence the price of the commodity, then the firm is said to be a price maker. A monopoly is a market structure in which there is only a single seller of the product, which has no close substitutes. There are high barriers to entry in monopoly market. As a single firm supplies for the whole market, the monopolist has market power to influence the price of the product. Hence, a monopolist is a price maker.

Option Price taker is incorrect because a monopolist is not a price taker. A firm is said to be a price taker when firm has no market power so as to influence the price of the product. As such, the firm sells its product at the market determined price and cannot influence the price of the product.

Option Efficient firm is Incorrect because a monopolist does not produce that level of output where average total cost is minimum. Hence, it produces an output less than the efficient level of output. Hence, it is not an efficient firm.

Option firm with high consumer welfare is Incorrect because a monopolist is a firm which reduces consumer welfare. The price charged by the monopolist is high and consumer welfare is minimised.

Rahul Sunny answered 2 months ago

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