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Question
The imposition of ceiling on a monopoly's price will affect his ____________.
The imposition of ceiling on a monopoly's price will affect his ____________.
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Solution
The correct option is D equilibrium output and profits
The imposition of price ceiling on monopoly's price will affect his equilibrium output and price. A monopoly is a price maker and influences the market as there are no close substitutes or competitors of the monopolist. By imposing a price restriction the government is restricting the price and there by converting the monopoly market like a competitive one. Hence, the equilibrium output and price will change because of the price ceiling.
The imposition of price ceiling on monopoly's price will affect his equilibrium output and price. A monopoly is a price maker and influences the market as there are no close substitutes or competitors of the monopolist. By imposing a price restriction the government is restricting the price and there by converting the monopoly market like a competitive one. Hence, the equilibrium output and price will change because of the price ceiling.
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