The supply curve for a pure monopolist:
A) is the portion of the marginal cost curve that lies above the average variable cost curve.
B) is perfectly price-elastic at the market price.
C) is upsloping across all relevant ranges of output.
D) does not exist because there is no unique relationship between price and quantity supplied.
The correct answer and explanation is :
The correct answer is D) does not exist because there is no unique relationship between price and quantity supplied.
Explanation:
In a purely competitive market, the supply curve shows the relationship between the price and the quantity of goods that producers are willing and able to supply, assuming other factors remain constant. The supply curve for a monopolist, however, does not follow this direct and straightforward relationship. This is because a monopolist is a single seller in the market, and its pricing and output decisions are not determined purely by supply and demand forces like in a perfectly competitive market.
A monopolist faces the market demand curve, which indicates the relationship between price and quantity demanded at each possible price. Unlike a firm in a perfectly competitive market, the monopolist has the ability to set the price and output level based on its profit-maximizing goal. It chooses the quantity of output to produce by equating marginal revenue (MR) with marginal cost (MC) and then uses the demand curve to determine the price that consumers are willing to pay for that quantity.
Because the monopolist can influence the price through its output decisions, there is no simple supply curve in the same sense as in competitive markets. The monopolist’s output decision is not based on a simple price-quantity relationship but on maximizing profit, which involves considering both marginal cost and marginal revenue. Additionally, the monopolist’s output decision is constrained by the market demand curve, meaning that the monopolist cannot produce a quantity of goods at just any price point. The price is determined by the intersection of the demand curve and the monopolist’s chosen output level.
Thus, there is no unique “supply curve” for a monopolist, and this is why Option D is correct. A monopolist does not have a fixed relationship between price and quantity supplied because of its market power to set prices.