As a price searcher, a monopoly firm
A) must only determine the price it charges.
B) must determine its optimal price-output combination.
C) must determine its output level and then accept the market price for its product.
D) must determine the prices it pays for its inputs and accept the market price for its output.

Question

Quizplus · Accepted Answer

As a price searcher, a monopoly firm has some degree of control over the price it charges for its product. Therefore, it must determine its optimal price-output combination to maximize profits. This involves considering the demand for its product, the costs of production, and the potential reactions of competitors. Option A is incorrect because the firm must also determine the output level that corresponds to its chosen price. Option C is incorrect because the firm cannot simply accept the market price for its output, but instead has some discretion in setting its own price. Option D is incorrect because the firm does not necessarily have control over the prices it pays for its inputs, though it will consider these costs when setting its price-output combination.

As a Price Searcher, a Monopoly Firm