Rahul owns a salmon farm with market power in Washington. Rahul's optimal output occurs where marginal revenue _____ marginal cost. Because of monopoly power, Rahul's supply curve _____.
A)equals; does not exist
B)exceeds; does not exist
C)equals; is upward sloping
D)exceeds; is perfectly inelastic

Question

Quizplus · Accepted Answer

In a monopoly or a market with market power, the optimal output level occurs where marginal revenue equals marginal cost. Unlike in perfect competition, a monopoly does not have a supply curve because its output decision is based on the marginal cost and marginal revenue, not the market price.

Rahul Owns a Salmon Farm with Market Power in Washington