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Questions
State with reason whether you agree or disagree with the following statement.
A seller is price maker in monopoly.
‘Under monopoly seller is the price-maker.’ Explain.
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Solution
Under monopoly, the seller is called a price-maker because there is only one firm in the market supplying the product, and there are no close substitutes available. Due to the lack of competition, the monopolist has complete control over the supply of the product.
This allows the monopolist to set the price by choosing any combination of price and quantity along the downward-sloping demand curve. However, while the monopolist can set the price, they cannot control the quantity demanded, as it depends on how consumers respond to that price.
Therefore, in a monopoly, the seller is not forced to accept the market price (unlike in perfect competition) and thus is rightly called a price-maker.
