If a firm is able to influence its price,
A) it is a monopoly.
B) it has constant marginal revenue.
C) it sells its output at a constant price.
D) it faces a downward-sloping demand curve.

Question

Quizplus · Accepted Answer

If a firm is able to influence its price, it means that it can adjust its sales by changing the price of its output. This is possible only if the firm faces a downward-sloping demand curve, which indicates that the firm can sell more quantity of the good at a lower price and less quantity at a higher price. This situation is different from a perfect competitor that has to sell its output at the market price, which is determined by the market demand and supply forces. A monopoly is a special case of a firm that has the exclusive control of the market supply, which enables it to set the price to maximize its profits. However, not all firms that are able to influence their price are monopolies.

If a Firm Is Able to Influence Its Price