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GCE Economics 1989 Question 39

Question 39

Market Structures

The downward sloping of the Average Revenue curve of the monopolist indicates that he

  1. A.can control both output and price
  2. B.can only break-even
  3. C.can control either the output or the price, but not both
  4. D.exploits the consumers.
Show the answer and explanation

Answer: C (can control either the output or the price, but not both)

Explanation

Because the monopolist faces the downward-sloping market demand curve, if he fixes price the market decides quantity, and if he fixes output the market decides price.