Which of the following would force a monopoly to charge a lower price?
A)A new firm selling the same product enters the market.
B)A new firm selling the same product locates close to the monopoly.
C)A new firm introduces a better substitute for the firm's product.
D)All of the above.

Question

Quizplus · Accepted Answer

All of the given situations would introduce competition to the market, and thus reduce the monopoly's control over the price. A new firm offering the same product would present consumers with a choice, and the monopoly would have to lower the price to maintain customers. If the new firm is located near the monopoly, it would make it easier for consumers to switch to the competitor and the monopoly would be forced to lower the price. If a new firm introduces a better substitute for the monopoly's product, it would take customers away from the monopoly, and again, the monopoly would be forced to lower the price to remain competitive.

Which of the Following Would Force a Monopoly to Charge