The demand curve a monopolist uses in making an output decision is:
A)the same as the demand curve facing a perfectly competitive firm.
B)positively sloped as it produces a highly differentiated product.
C)vertical as there are no close substitutes for its product.
D)the same as the market demand curve.
E)perfectly price inelastic.

Question

The demand curve a monopolist uses in making an output decision is:​
A)the same as the demand curve facing a perfectly competitive firm.
B)positively sloped as it produces a highly differentiated product.
C)vertical as there are no close substitutes for its product.
D)the same as the market demand curve.
E)perfectly price inelastic.

Quizplus · Accepted Answer

A monopolist's demand curve is the same as the market demand curve because it has control over the entire market supply and can influence the market price by adjusting its own quantity supplied. Therefore, it cannot take the price as given and its demand curve is not the same as a perfectly competitive firm. The demand curve is not necessarily positively sloped or perfectly price inelastic, and while a monopolist may have some level of product differentiation, this does not necessarily mean that its demand curve will be positively sloped. The demand curve is also not necessarily vertical as some substitutes may exist, even if they are not close substitutes.

The Demand Curve a Monopolist Uses in Making an Output