A Monopolistic Firm

question 3

Multiple Choice

A monopolistic firm

• A) will never sell a product whose demand is inelastic at the quantity sold.
• B) can sell as much as it wants for any price it determines in the market.
• C) cannot determine the price, which is determined by consumer demand.
• D) cannot sell additional quantity unless it raises the price on each unit.
• E) will always earn a profit in the long run.

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Definitions:

Entry Barriers

Obstacles that make it difficult for new firms to enter a market, including high start-up costs, stringent regulations, and strong incumbent competition.

Brand Loyalty

The tendency of consumers to continuously purchase one brand's products over competing brands due to preference or satisfaction.

Monopoly Power

The ability of a single producer or seller in a market to control prices and exclude competition, often leading to less choice and higher prices for consumers.

Cartels

An agreement among competing firms to control prices or exclude entry of a new competitor in a market, often to maximize profits collectively.