question archive For a firm to successfully exercise monopoly power to increase its profits, a
For a firm to successfully exercise monopoly power to increase its profits, a
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For a firm to successfully exercise monopoly power to increase its profits,
a. there must be a barrier to entry of other sellers into its market.
b. the demand for the firm's product must be strong enough to allow it to cover its costs at the profit-maximizing output.
c. there must be a free entry of sellers into the market.
d. there must be many other sellers in the market seeking to maximize profits.
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The correct answer is a. there must be a barrier to entry of other sellers into its market.
Reason: The monopoly firm can successfully exercise its powers to maximize its profits when there are entry barriers to other firms or sellers into the monopoly market. The other competitor firms cannot easily enter into the monopoly market, then monopolists can enjoy all the powers and can increase the profits.
The customer will take the products and services from monopolists only as they have no choice to buy the items from others. This leads to the high profit earning of a monopoly firm.
