How does the demand curve facing a home monopolist compare in a
Notrade situation to a situation in which a quota protects the
Monopolist's output?

Question

How does the demand curve facing a home monopolist compare in a
No­trade situation to a situation in which a quota protects the
Monopolist's output?

Quizplus · Accepted Answer

When there is no trade, the demand curve facing the home monopolist shows the maximum price that the buyers are willing to pay for a given quantity of the monopolist's product. However, when a quota is imposed, the monopolist faces a smaller market size and therefore a lower demand for its product. As a result, the quota-protected demand curve lies to the left of the no-trade demand curve. Thus, choice C is the correct answer.

How Does the Demand Curve Facing a Home Monopolist Compare