"Being the only seller in the market, the monopolist can choose any price and quality it...

"Being the only seller in the market, the monopolist can choose any price and quality it desired" Explain and evaluate this statement

Expert Solution

A monopoly firm is a single seller because there are barriers to entry. In a pure monopoly industry, there is a single firm. The barriers to entry are those factors which lead to the restriction of entry by the new firms. These are patent laws that restrict the entry of new firms. License and copyrights are also an example of barriers to entry. Therefore a monopolist firm has the market power, so it can charge any prices and quantity because consumers do not have any options..

Since the firm is a single seller of the goods and firm is a price maker and therefore for selling more units the monopolist firm needs to decrease the price. This is the reason why at each output level, marginal revenue is less than the price because price should be lowered to increase sales quantity.

Since the profit-maximizing condition for the monopoly is

MR=MC

Corresponding to this condition the output is determined and on the demand curve, the price will be determined

Rahul Sunny answered 9 months ago

A monopsonist/monopolist is the only buyer/seller of a particular variety of apples. Show graphically: the price...

A monopsonist/monopolist is the only buyer/seller of a particular variety of apples. Show graphically: the price paid to farmers (buying price), the selling price, the monopsonist’s profit, the farmers surplus loss (compared to selling in a perfectly competitive market).

1. In general, a monopolist: can select any price and quantity combination that is on the...

1. In general, a monopolist: can select any price and quantity combination that is on the demand curve. is limited by the price and quantity that government regulations set. is a price taker. can select any price and quantity that it wants. 2. Economic profit in the long run is Multiple Choice possible for both a monopoly and a perfect competitor. possible for a monopoly but not for a perfect competitor. impossible for both a monopolist and a perfect competitor....

Lemons Market: A buyer and a seller can potentially trade a car of uncertain quality; the...

Lemons Market: A buyer and a seller can potentially trade a car of uncertain quality; the car is equally likely to be a lemon, or a peach. The true value of a lemon is $2,000 and the true value of a peach is $5,000. Buyers buy cars based on their expectation of the true value of cars in the market. Suppose the buyer cannot tell the true quality of the car, but the seller knows the quality of his car....

There is a single seller in a market which faces market demand: P=85-2Q. The monopolist has...

There is a single seller in a market which faces market demand: P=85-2Q. The monopolist has total costs TC=5Q and MC=5. What is the profit of the monopolist?

Are there any products that are sold in a market in which the seller is able...

Are there any products that are sold in a market in which the seller is able to charge different prices to different consumers? How are the sellers able to do this?

Single-Price Monopoly: Consider a single-price monopolist (i.e. the monopolist cannot price discriminate) facing the following market...

Single-Price Monopoly: Consider a single-price monopolist (i.e. the monopolist cannot price discriminate) facing the following market demand curve: P = 120 − Q. The monopolist has constant marginal cost of $20 and zero fixed cost. (a) Determine the monopolist’s profit maximizing quantity, denoted QM, and profit-maximizing price, denoted PM. (b) Determine the quantity and price that would result in the market if this instead were a competitive market, denoted QC and PC, respectively. (c) Draw a picture of the market...

Select the term that matches the concept: Market with only one seller. Select one: a. Market...

Select the term that matches the concept: Market with only one seller. Select one: a. Market with only one seller. b. Cartel c. Price Taker d. Market with only one buyer. It seems like a dumb question but I wanted a second opinion in case it was a trick

How can warranty at the seller expense signal that a product is of high quality

In the market for college degrees, there are many buyers but only 1 seller. Qd =...

In the market for college degrees, there are many buyers but only 1 seller. Qd = 1000 – 2P. This implies that Price or Private MB = 500 - .5Q. Education has positive externalities. Assume each degree has a $50 value to society. Such that the Social MB = 550 - .5Q. MC = 100. What is the efficient amount for Q and the corresponding P and Total Surplus? Remembering Revenue = PQ, what is the equation for marginal revenue...

Suppose that there is only one ﬁrm, the monopolist and many consumers in the market. Assume...

Suppose that there is only one ﬁrm, the monopolist and many consumers in the market. Assume that the market demand function is given by P = 210−2Qd and the monopolist’s cost function is given by C(Q) = 10Q. (a) Setup the monopolist’s proﬁt maximization problem. (b) Solve the monopolist’s proﬁt maximization problem and ﬁnd the market equilibrium price P∗ and quantity Q∗. Now, assume that the government eliminates all the entry cost of entering the market as the government wants...

Question