Question

A monopoly firm faces a downward sloping demand curve because _______.

• A. it has an inelastic demand
• B. it sells large quantities to few buyers
• C. it is same as the industry
• D. consumers prefer its product

Answer 1

The correct option is D consumers prefer its product

In a monopoly competition, there is only one seller and huge number of buyers due to which there remains no competition for the seller and no substitutes for the buyers. Therefore, a monopolist has ultimate control over the price of the commodity which is known as monopoly power of the firm. Under this market, the firm can earn super normal profits but then also the firm has to keep its price low in order to sell more quantity in the market due to which they have a downward sloping demand curve.