Question

Assertion (A): A monopoly firm is price taker.

Reason (R): In the monopoly market, there is only a single seller.

Options

• Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true but Reason (R) is false.

• Assertion (A) is false but Reason (R) is true.

Answer 1

Assertion (A) is false but Reason (R) is true.

Explanation:

The assertion is false because a monopoly firm is a price maker, not a price taker; it holds complete control over the market price due to the absence of competitors. The reason is true because a monopoly market structure is defined clearly by the presence of a single seller who controls the whole industry supply. As a result, while the definition provided in the reason is correct, the assertion contradicts a monopolist's true pricing power.