Question

g Which of the following scenarios best represents the pricing behavior of a monopolist? 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. 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. 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. Stay*Put Pins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost.

Answer 1

Answer: "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."

This scenario best represents the behavior of a monopolist

Explanation: Mainly a monopolist has no competitors and does not look at his behavior. To maximize profits, a production should be set such that the marginal income is equal to the marginal cost. When the amount required by that point is transferred to demand, the optimum point that determines the monopoly price is found, which maximizes the benefits.