When we say that a fi􏰃rm has 'monopoly power' we imply the fi􏰃rm can...

Question

When we say that a fi􏰃rm has 'monopoly power' we imply the fi􏰃rm can...

a. produce at zero cost

b. produce many di􏰂erent goods

c. set their own prices

d. ignore government regulators

Answer 1

In a competitive market firms are all small fish in a big pond. They are price takers If there is a single seller, if he wants to sell more than he is currently selling he must lower price. If he wants to raise price he will have to sell less. The extent of monopoly power is measure by how much a firm can charge above Long Run average cost. Monopoly means Single Seller. Monopsony is a single Buyer. In that case the price will be determined by how much the single buyer wishes to buy.