Suppose a single firm supplies all the ceramic windlasses in the U.S. The demand curve that the firm faces is:

Question

Suppose a single firm supplies all the ceramic windlasses in the U.S. The demand curve that the firm faces is:​

Quizplus · Accepted Answer

Since the firm is the only supplier of ceramic windlasses, they have market power and can charge a higher price. The demand curve they face is likely to be downward sloping and elastic at lower prices, but as they increase the price, demand will become less elastic until it is perfectly inelastic at the maximum price buyers are willing to pay. Therefore, the demand curve is elastic only at the profit-maximizing output.

Suppose a Single Firm Supplies All the Ceramic Windlasses in the U.S