Why is a Monoploist unable to charge whatever price it wants? a) monopolists are price makers and can charge whatever it wants b) the substitution effect c) the income effect d) it faces a downsloping demand curve 12) Refer to the graphs of D and MR for a monopolist. We know that to maximize profits the firm will set a price a) above P1 b) above p2 c) below p3 d) below p2
Why is a Monoploist unable to charge whatever price it wants? a) monopolists are price makers and can charge whatever it wants b) the substitution effect c) the income effect d) it faces a downsloping demand curve 12) Refer to the graphs of D and MR for a monopolist. We know that to maximize profits the firm will set a price a) above P1 b) above p2 c) below p3 d) below p2
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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11) Why is a Monoploist unable to charge whatever
a) monopolists are price makers and can charge whatever it wants
b) the substitution effect
c) the income effect
d) it faces a downsloping
12) Refer to the graphs of D and MR for a monopolist. We know that to maximize profits the firm will set a price
a) above P1
b) above p2
c) below p3
d) below p2
Transcribed Image Text:The image shows a graph representing the relationship between price and quantity in a market, focusing on demand and marginal revenue.
**Axes:**
- The vertical axis represents the "Price" of the product.
- The horizontal axis represents the "Quantity" of the product.
**Lines:**
- The "Demand" line is a downward-sloping line from left to right, showing an inverse relationship between price and quantity. It intersects the price axis at \(P_1\) and is labeled "Demand."
- The "MR" or "Marginal Revenue" line is also downward-sloping and lies below the demand line, indicating how marginal revenue changes with quantity.
**Points:**
- The graph identifies three price levels, \(P_1\), \(P_2\), and \(P_3\), and their corresponding quantities, \(Q_1\), \(Q_2\), and \(Q_3\).
**Analysis:**
This graph demonstrates basic economic concepts, showing how as quantity increases, the price tends to decrease under the given demand curve. The marginal revenue curve suggests how much additional revenue is generated from selling one more unit, typically less than the price due to the need to lower the price to sell additional units.
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