The Ultimate Market Constraint on the Exercise of Market Power

question 79

Multiple Choice

The ultimate market constraint on the exercise of market power

• A)Is the demand curve facing the monopolist.
• B)Is marginal cost pricing.
• C)Is the ATC curve facing the monopolist.
• D)Is barriers to entry.

---

Definitions:

Fixed Costs

Expenses that do not change in proportion to the activities of a business, such as rent and salaries, within a certain period or level of production.

Cost Equation

A formula used to predict the total costs of production, based on fixed and variable costs, as a function of activity levels.

Contribution Margin

The selling price per unit minus the variable cost per unit, which helps determine how much sales contribute to covering fixed costs and generating profit.

Variable Costs

These are costs that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.