Chapter 22: Problem 9

Which statement is true? (LO3) a) The monopolist cannot lose money. b) The monopolist always operates a large firm. c) The monopolist will not lose money in the short run. d) The monopolist will not lose money in the long run.

Short Answer

Expert verified

The true statement is (d) "The monopolist will not lose money in the long run."

Step by step solution

Analyzing Statement (a)

"The monopolist cannot lose money." A monopolist can indeed lose money in certain situations, such as when the total costs of production exceed total revenue. Both in the short run and the long run, a monopolist can face losses if their production costs are too high, or the demand for their product decreases significantly. So, this statement is false.

Analyzing Statement (b)

"The monopolist always operates a large firm." A monopolist does not always operate a large firm. A monopoly can exist in industries of any size and can be held by small, medium, or large firms. The critical aspect of a monopoly is that the firm has exclusive control over the market for a specific product or service, not necessarily that it is a large firm. Thus, this statement is also false.

Analyzing Statement (c)

"The monopolist will not lose money in the short run." A monopolist can experience losses in the short run when its costs of production exceed its total revenue. This can happen due to various factors such as decreasing demand, increasing costs, or price regulations. In the short run, a monopolist may be unable to cover these losses and discontinue operations. Therefore, this statement is false.

Analyzing Statement (d)

"The monopolist will not lose money in the long run." In the long run, a monopolist has the ability to adjust its production levels and facilities, as well as optimize its pricing strategy, to maximize profit and avoid making losses. While this might not guarantee that the monopolist will never lose money in the long run, it does provide a strong likelihood that a monopolist will not experience long-term sustained losses. Compared to the other statements, which are clearly false, this one is the most accurate. #Final Answer#: The true statement is (d) "The monopolist will not lose money in the long run."

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