A monopolistic firm is a:
A) price taker that faces the market supply curve.
B) price taker that faces the market demand curve.
C) price maker that faces the market supply curve.
D) price maker that faces the market demand curve.

Question

Quizplus · Accepted Answer

A monopolistic firm is a price maker because it has some control over the price it charges due to its market power. However, it does not face the market demand curve because it can only sell a limited quantity of output at any given price due to the presence of substitutes. Therefore, it faces a downward-sloping demand curve that reflects the tradeoff between price and quantity sold.

A Monopolistic Firm Is A