Final answer:
In a Monopoly market, the seller reacts to price as a price maker. In a monopoly market, the seller, having significant market power, can set prices and would likely increase both the price and quantity supplied if demand rises, unlike a perfectly competitive firm which is a price taker and has to accept the market-determined price.
Step-by-step explanation:
A seller in a Monopoly market reacts to price as a price maker
In a monopoly market, the seller has the power to set the price of their product without considering competition. However, the seller's decision is influenced by factors such as production costs, demand, and market conditions. This is in contrast to a perfectly competitive market where the seller is a price taker and must accept the prevailing market price.
In a monopoly market, the seller, having significant market power, can set prices and would likely increase both the price and quantity supplied if demand rises, unlike a perfectly competitive firm which is a price taker and has to accept the market-determined price.
In a monopoly market, the seller does not react to price as a perfectly competitive firm would. A perfectly competitive firm is known as a price taker, which means they accept the prevailing equilibrium price set by the market's supply and demand. In stark contrast, a monopolist, being the sole provider of a particular product or service, may set the price to their advantage, as they have significant market power and face no direct competition. If a monopolist were to experience an increase in demand, perhaps due to a successful advertising campaign, they would likely respond by increasing both the price and quantity supplied to maximize profits. This is because a monopolist has a downward-sloping demand curve, allowing them to increase prices when demand increases, unlike a perfectly competitive firm that must always sell at the market price.