Which of the Following Is a Possible Explanation for the Fall

question 69

Multiple Choice

Which of the following is a possible explanation for the fall in prices after an industry is monopolized by combining a group of competitors?

• A)A monopolist faces a downward sloping demand curve.Hence, output expansion leads to lower prices.
• B)A reduction in price increases producer surplus.Hence a monopolist may reduce the price of his product.
• C)A monopolist may reduce prices to make it difficult for other firms to compete.
• D)A monopolist can increase profits by reducing price when its cost of production declines due to increased size of the new firm.The fall in price is less than the decline in cost.

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Definitions:

Brand Names

Brand names are names given to a product or service by a company to differentiate it from competitors, signifying reputation and quality.

Less Developed Country

A country characterized by low levels of economic development, often measured by GDP per capita, industrialization, and standard of living.

Monopolistically Competitive

A market structure characterized by many firms selling products that are similar but not identical, allowing for some degree of market power and product differentiation.

Oligopoly

A market setup where just a few companies dominate the market, resulting in minimal competition.