If a firm possesses monopoly power, it means that:
A) the firm can set its own price based on its output decision.
B) the firm's demand curve is always elastic.
C) the firm is necessarily a monopoly.
D) A and C are true.

Question

Quizplus · Accepted Answer

If a firm possesses monopoly power, it means that the firm has the ability to set its own price based on its output decision. This is a defining characteristic of monopoly power. The demand curve for a monopoly is downward sloping, but it is not always elastic (as implied in choice B). Choice C is incorrect because a firm can have monopoly power without being the only firm in the market (i.e. a monopolistic competition or oligopoly market structure). Therefore, the correct answer is A.

If a Firm Possesses Monopoly Power, It Means That