Author Question: How is the demand curve faced by a perfectly competitive firm different from that faced by a ... (Read 154 times)

lb_gilbert

  • Hero Member
  • *****
  • Posts: 588
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
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
 

Did you know?

Hyperthyroidism leads to an increased rate of metabolism and affects about 1% of women but only 0.1% of men. For most people, this increased metabolic rate causes the thyroid gland to become enlarged (known as a goiter).

Did you know?

It is difficult to obtain enough calcium without consuming milk or other dairy foods.

Did you know?

Every 10 seconds, a person in the United States goes to the emergency room complaining of head pain. About 1.2 million visits are for acute migraine attacks.

Did you know?

Throughout history, plants containing cardiac steroids have been used as heart drugs and as poisons (e.g., in arrows used in combat), emetics, and diuretics.

Did you know?

Once thought to have neurofibromatosis, Joseph Merrick (also known as "the elephant man") is now, in retrospect, thought by clinical experts to have had Proteus syndrome. This endocrine disease causes continued and abnormal growth of the bones, muscles, skin, and so on and can become completely debilitating with severe deformities occurring anywhere on the body.

For a complete list of videos, visit our video library