Which of the following statements is correct? a. A firm with monopoly power faces a downward...

Which of the following statements is correct?

a. A firm with monopoly power faces a downward sloping demand curve. When all output units are sold at the same price, the demand curve also gives the firm’s average revenue per output sold. Its marginal revenue curve per output is found below the demand curve.

b. A firm with monopsony power faces an upward sloping supply curve. When all input units are purchased/rented at the same price, the supply curve also gives the firm’s average expenditure per input purchased/rented. Its marginal expenditure per input is found above the supply curve.

c. A perfectly competitive firm will sell its output at whatever the prevailing market price is and will decide only on its profit maximizing level of output to produce—not on the price to sell them at. Such a firm is set to be a price-taker.

d. All of the above.

Solutions

Expert Solution

Ans) the correct option is d) all of the above

Monopoly is a price setter because it has some market power and control over the prices. In perfect competition, firms are price taker.

Rahul Sunny answered 1 year ago

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