CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Which of the following is true of a monopoly?
A. A monopoly always charges the highest possible price.
B. The monopoly's demand curve and the market demand curve are one and the same.
C. The main concern of a monopoly is not profit maximization but preservation of its monopoly status.
Explanation: There is no entry or exit in purely monopolistic markets.

User Contributed Comments 5

User Comment
danlan A is wrong?
mtcfa Yes A is wrong. Monoplolies will produce where MC and MR intersect, then price correspondingly based on their demand curve.
wink44 Why does the monopolist producer have a demand curve for its own product. Wouldn't it be a supply curve, and since its the only firm, wouldn't its supply curve match the market supply curve? The market may have a different looking demand curve, especially if it's not a natural monopoly. Can anyone give me their explanation?
Smurfy demand curve facing the firm is the same as the demand curve facing the market because the firm is the market in this case.
zed888 what about C? a monopoly will spend a large amount of irs resource to try and ensure it maintains its monopoly status (rent seeking). this will on many occasions turn economic profit in to normal profit, so it does not maximize profit?
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