Angelo is a wholesale meatball distributor.He sells his meatballs to all the finest Italian restaurants in town.Nobody can make meatballs like Angelo.As a result,his is the only business in town that sells meatballs to restaurants.Assuming that Angelo is maximizing his profit,which of the following statements is true?

Question

Quizplus · Accepted Answer

Since Angelo is the only meatball supplier in town and nobody can make meatballs like him, he has monopoly power. In this case, the profit maximizing price is where marginal revenue equals marginal cost, which is at a lower quantity sold and a higher price than the competitive market. Therefore, meatball prices will exceed marginal cost.

Angelo Is a Wholesale Meatball Distributor