Why does a monopolist face the market demand curve?
A)Presence of a large number of substitutes
B)Presence of large number of buyers in the market
C)Barred entry of any new firm in the market
D)Produces a homogeneous product
E)Consumers have perfect knowledge of the market

Question

Quizplus · Accepted Answer

A monopolist faces the market demand curve because it is the only firm present in the market and, therefore, has the ability to set the price of its product. The monopolist establishes the price at a level that maximizes its profits, taking into account the quantity demanded by consumers at that price. The demand curve faced by the monopolist is the market demand curve, which represents the willingness of all buyers in the market to purchase the monopolist's product at different prices. The presence of a large number of substitutes, a large number of buyers in the market, a homogeneous product, or consumers with perfect knowledge of the market are factors that can prevent the emergence of a monopolist.

Why Does a Monopolist Face the Market Demand Curve