« previous next »

Author Question: How is the demand curve faced by a perfectly competitive firm different from that faced by a ... (Read 134 times)

lb_gilbert

  • Hero Member
  • *****
  • Posts: 588
on: Jun 29, 2018
How is the demand curve faced by a perfectly competitive firm different from that faced by a monopoly? How does it affect their pricing policies?
 
  What will be an ideal response?

Question 2

Other things constant, when households decide to save more, the supply of credit ________ and interest rates ________.
 
  A) falls; rise
  B) falls; fall
  C) rises; rise
  D) rises; fall


verrinzo

  • Sr. Member
  • ****
  • Posts: 346
Reply #1 on: Jun 29, 2018
Answer to Question 1

Perfectly competitive firms face a horizontal demand curve for their product, while a monopolist faces a downward-sloping demand curve for its product. A horizontal demand curve implies perfectly elastic demand. This means that if perfectly competitive firms set their product prices above the market price, they lose all of their business. This makes them price takers. On the other hand, the downward sloping demand curve faced by a monopolist implies that a monopolist can sell a lower quantity at a higher price and vice versa. Hence, monopolies have the option of setting the market price for their products, which makes them price makers.

Answer to Question 2

D


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

As many as 28% of hospitalized patients requiring mechanical ventilators to help them breathe (for more than 48 hours) will develop ventilator-associated pneumonia. Current therapy involves intravenous antibiotics, but new antibiotics that can be inhaled (and more directly treat the infection) are being developed.

Did you know?

There used to be a metric calendar, as well as metric clocks. The metric calendar, or "French Republican Calendar" divided the year into 12 months, but each month was divided into three 10-day weeks. Each day had 10 decimal hours. Each hour had 100 decimal minutes. Due to lack of popularity, the metric clocks and calendars were ended in 1795, three years after they had been first marketed.

Did you know?

In 1886, William Bates reported on the discovery of a substance produced by the adrenal gland that turned out to be epinephrine (adrenaline). In 1904, this drug was first artificially synthesized by Friedrich Stolz.

Did you know?

Computer programs are available that crosscheck a new drug's possible trade name with all other trade names currently available. These programs detect dangerous similarities between names and alert the manufacturer of the drug.

Did you know?

People who have myopia, or nearsightedness, are not able to see objects at a distance but only up close. It occurs when the cornea is either curved too steeply, the eye is too long, or both. This condition is progressive and worsens with time. More than 100 million people in the United States are nearsighted, but only 20% of those are born with the condition. Diet, eye exercise, drug therapy, and corrective lenses can all help manage nearsightedness.

One-handed kneading. Tissues are lifted with the whole hand in firm contact. One-handed kneading. Tissues are lifted with the whole hand in firm contact.
A dose-response curve describes the relationship between the quantity of the chemical entering the ... A dose-response curve describes the relationship between the quantity of the chemical entering the ...
Titration curve for the tetrapeptide Glu-Gly-Ala-Lys Titration curve for the tetrapeptide Glu-Gly-Ala-Lys
The introduction of a new generation of electric and hybrid cars will reduce the demand for oil The introduction of a new generation of electric and hybrid cars will reduce the demand for oil
The Kuznets Curve in England and Wales, 1823–1915 The Kuznets Curve in England and Wales, 1823–1915
Normal frequency distribution, characterized by a bell-shaped curve Normal frequency distribution, characterized by a bell-shaped curve
Video: Mycobacterium tuberculosis: Drug Resistance and Natural Selection

For a complete list of videos, visit our video library