Question

15. “A monopolist does not have a supply curve.” Why is this an important concept, and what is the difference from competitive sellers, who do have supply curves? 16. Why does the monopolist's marginal revenue curve lie

#15

Answer 1

15) A monopolist sets the price according to the market demand curve and it sets the equilibrium price which is equal to Marginal Revenue = Marginal Cost. If the Average Revenue and the Marginal Revenue changes, then the monopoly will change its price accordingly with the change in the demand curve which may occur due to a number of factors such as elasticity of the good, location of different markets, price discrimination with respect to willingness to pay among consumers, etc. Thus, a monopolist is a price maker.

On the other hand, competitive market sellers are price takers. This means that the competitive market sellers takes the price as given and changes their supply accordingly and they cannot change the price when the demand in the market changes. That is why, a monopolist does not have a supply curve but competitive sellers have supply curves.