question archive State True or False and justify your answer: If a rational monopolist is confronted with a dramatic increase in its fixed costs, then this monopolist, ceteris paribus, would have a strong incentive to pass at least some of this fixed cost along to consumers in the form of higher prices for its products
State True or False and justify your answer: If a rational monopolist is confronted with a dramatic increase in its fixed costs, then this monopolist, ceteris paribus, would have a strong incentive to pass at least some of this fixed cost along to consumers in the form of higher prices for its products
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State True or False and justify your answer:
If a rational monopolist is confronted with a dramatic increase in its fixed costs, then this monopolist, ceteris paribus, would have a strong incentive to pass at least some of this fixed cost along to consumers in the form of higher prices for its products.
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The statement is True
Explanation: Monopolist is the price maker, so it is very easy for him to pass on the cost of fixed assets to the consumers by raising the prices of goods and services. On the other hand, consumers will be left with no choice because there is only one single seller in the market, and so, they have to buy goods at high prices as well.
Increasing the prices of goods and services and passing on the burden to consumers will help monopolist to cover the increase in its fixed costs.
