Answer true or false, with a brief explanation. 1. Monopolies are always bad for consumers. 2....

Answer true or false, with a brief explanation.

1. Monopolies are always bad for consumers.

2. The supply curve of a monopolist is upward sloping.

3. Monopolies charge the highest price a consumer is willing to pay, thus capturing all consumer surplus.

Solutions

Expert Solution

1. True.

Monopolies are always bad for the consumers because in Monopoly condition as there is only a single seller in the market for a particular product. The seller charges the maximum possible price for the product to maximize his profit. Consumers bearing loss will have to buy from that seller even at high price as there is no other options available for them.

2. False.

There is no supply curve for a monopolist because monopolists are price maker instead of a price taker. Monopolist decides it's price and quantity to be supplied by its own. So there is no need of supply curve for a monopolist.

3.True.

Consumer surplus is extra unit of benefit received by the consumer while purchasing a good. It is the difference between price a consumer willing to pay and the price that hey actually pays.

The price charged by the monopolist for a particular product is much more than price in competitive market.

As Monopolist charge maximum price for every unit of product. The consumer pays the price that he is willing to pay. So all the consumer surplus is captured.

Rahul Sunny answered 1 year ago

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