Which of the following scenarios best represents the pricing behavior of a monopolist?

a.) Stay*Put Pins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost. b.) Copycat Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration when pricing its products. c.) Our Drugs Inc. produces where its marginal revenue is equal to its marginal cost and prices on its downward-sloping demand curve, such that the market for its product clears knowing it will not face competition due to patents it holds on its products. d.) Teen Angle Hardware looks for a niche to sell its hardware products to teens, but finds that it is difficult to turn an economic profit due to other hardware stores also looking for niches.

Question

Roger

Business

29 September, 07:07

Which of the following scenarios best represents the pricing behavior of a monopolist?

a.) Stay*Put Pins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost. b.) Copycat Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration when pricing its products. c.) Our Drugs Inc. produces where its marginal revenue is equal to its marginal cost and prices on its downward-sloping demand curve, such that the market for its product clears knowing it will not face competition due to patents it holds on its products. d.) Teen Angle Hardware looks for a niche to sell its hardware products to teens, but finds that it is difficult to turn an economic profit due to other hardware stores also looking for niches.

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Answers (1)

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Camron Garza · Answer 1

c.) Our Drugs Inc. produces where its marginal revenue is equal to its marginal cost and prices on its downward-sloping demand curve, such that the market for its product clears knowing it will not face competition due to patents it holds on its products.

Explanation:

In a monopoly, one single firm sets the price for a product. Since "Our Drugs Inc" has patents on its products, no other companies can sell the same thing so their company has a monopoly.