If the market price changes substantially when a firm cuts its level of production, then the firm is most likely to be
A)a competitor.
B)a monopoly.
C)both a competitor and a monopoly.
D)neither a competitor nor a monopoly.
E)a firm with no market power.

Question

Quizplus · Accepted Answer

A monopoly has market power, meaning it can affect the market price by changing its level of production. A competitor, on the other hand, is one of many firms in the market and is not likely to have significant market power. Therefore, if the market price changes substantially when a firm cuts its level of production, it is most likely a monopoly.

If the Market Price Changes Substantially When a Firm Cuts