1. b. In at least 3 detailed paragraphs, answer the following three questions (use examples to...

Question

1. b. In at least 3 detailed paragraphs, answer the following three questions (use examples to illustrate your response): What is meant when a monopoly firm is described as a price maker? How is a price maker different from a price taker? Is a monopoly ever a price taker?

2. b. For each of the labor markets in which market power over the wage rate is present, write a paragraph describing the characteristics, implications, and provide examples.

3. a. In at least 2 paragraphs, describe why an appreciating dollar helps U.S. consumers, but hurts U.S. producers. Include why appreciation occurs and a real-world example relating to this issue.

David · Accepted Answer

What is meant when a monopoly firm is described as a price maker? How is a price maker 
different from a price taker? Is a monopoly ever a price taker? 
Solution: 
When there exist many sellers competing with each other like in a perfectly competitive market, there if 
one of the sellers among the various ones, tries to hike the prices more than what is prevailing in the 
market (determined by the forces of demand and supply), he will lose his market share, because there is 
always another seller who will undercut that price. In brief we can say that firms in perfectly competitive 
market have no market power and hence they are simply the price taker. But contrary to this a 
monopoly firm has market power. Their dominance in the market empowers them to set the prices as 
the products dealt in by them have no close substitutes. Instead of so many sellers there is only a single 
seller. If that single seller sets high prices, there is none to undercut his price as there is no competitor in 
the market. This is the reason why a monopoly firm is called the price maker. It is due to this feature of 
markets that slope of the demand curve of a monopoly firm is negatively sloped but less elastic, while 
firm in the perfectly competitive market faces perfectly elastic demand curve.   
A price maker enjoys the market power and hence he can set prices as par his whims,

1. b. In at least 3 detailed paragraphs, answer the following three questions (use examples to illustrate your response): What is meant when a monopoly firm is described as a price maker? How is a...

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