Microeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859484
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Question
Chapter 11, Problem 1E
To determine
To state:
Whether C Company is a
Expert Solution & Answer
Answer to Problem 1E
The C Company is a monopoly.
Explanation of Solution
Monopoly is a market structure where only a single seller exists. Certain distinctive features of monopoly are as follows:
- Only a single seller exists.
- Product is differentiated.
- Low
price elasticity of demand for own goodswhich meansinelastic demand for own goods. - Very low cross-price elasticity of demand which means. no close substitutes exist,
- Strong barriers to entry (natural or technical).
- Monopolist (firm) is the price maker. industry is the price taker, and
- Supernormal profits in the long run.
A monopolistic firm has the power to influence the price and output in the industry. As C Company has 85% of the market share, it has the power to decide the market price or major share of the industry output. Hence, it is a monopolist firm.
Economics Concept Introduction
Monopoly:
Monopoly is a market structure where there is only one seller and products are differentiated. A single firm has a larger control over the market in this kind of structure.
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