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Giving reasons, state whether the following statements are true or false.
A monopolist can sell any quantity he likes at a price.


False, a monopolist cannot sell any quantity he likes at a price because the monopolist controls only the supply and not the demand. A monopolist can only determine one of two things. It has to be either price or quantity; this is because there is a fixed price consumers are willing to pay for a given quantity. As a result a monopolist can only charge the price corresponding to the specific quantity he has set otherwise the goods he has produced won’t be sold. This is because he has no control over the quantity that he can sell in the market. Rather, it depends on the buyers that what quantity of output they want to purchase at the price fixed by the monopolist. If the monopolist fixes a higher price, then lesser quantity of the output will be demanded and lesser quantity will be sold in the market. On the other hand, if he fixes a lower price, then higher quantity of the good will be sold.

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Explain the effects of 'maximum price ceiling' on the market of a good'? Use diagram.


Why is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium? Is it sufficient to ensure equilibrium? Explain.


Market for a good is in equilibrium. The demand for the good 'increases'. Explain the chain of effects of this change.


Market of a commodity is in equilibrium. Demand for the commodity 'increases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.


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