A firm that has monopoly power in the supply of a factor makes choices in same manner as any other monopoly firm by selling where _______ and selecting a price determined by the _______ curve.

Question

Quizplus · Accepted Answer

A firm with monopoly power in the supply of a factor will choose to produce where its marginal revenue equals its marginal cost (MR = MC), just like any other monopoly firm. However, the price will be determined by the demand curve, since the firm has monopoly power in the supply of a factor. Choice (C) is therefore the correct answer, as it corresponds to the standard profit-maximizing condition for a monopoly firm.

A Firm That Has Monopoly Power in the Supply of a Factor