Final answer:
Three assumptions made when looking at a monopoly's demand are: a downward-sloping demand curve, no close substitutes, and barriers to entry.
Step-by-step explanation:
When looking at a monopoly's demand, there are three assumptions that are typically made:
- There is a downward-sloping demand curve: A monopoly perceives its demand curve to be the same as the market demand curve, which is downward-sloping. This means that as the price increases, the quantity demanded decreases.
- No close substitutes: A monopoly is the only firm in the market, so there are no close substitutes available for consumers. This gives the monopoly more control over the price it can charge.
- Barriers to entry: A monopoly is comfortably surrounded by barriers to entry, meaning there are obstacles that prevent other producers from entering the market and competing with the monopoly. This allows the monopoly to maintain its market power and charge higher prices.