Which of the following statements is true?
A) A monopolist faces an upward-sloping demand curve.
B) A perfectly competitive firm faces an upward-sloping demand curve.
C) A monopolist can increase the price of its product and not lose all of its business.
D) A perfectly competitive firm can increase the price of its product without losing its business.

Question

Quizplus · Accepted Answer

A monopolist can increase its price without losing all of its business because there are no close substitutes for its product, and consumers still have a demand for it. However, a perfectly competitive firm cannot increase its price without losing its business as it faces many competitors selling the same product, and consumers can easily switch to a cheaper alternative. Option A is incorrect because a monopolist faces a downward-sloping demand curve. Option B is incorrect since a perfectly competitive firm faces a horizontal demand curve, indicating that it has no control over the price and must accept the market price. Option D is incorrect for the reason mentioned above.

Which of the Following Statements Is True