Which type of demand curve do monopoly firms face?

• A. A downward-sloping market demand curve
• B. A perfectly inelastic demand curve
• C. A perfectly elastic demand curve
• D. A horizontal demand curve at the market price

Answer: (A)

Verified step by step guidance

1. Understand that a monopoly is a single seller in the market, so the demand curve it faces is the market demand curve itself.
2. Recall that the market demand curve typically slopes downward, meaning that as price decreases, quantity demanded increases.
3. Recognize that unlike a perfectly competitive firm, which faces a perfectly elastic (horizontal) demand curve at the market price, a monopolist's demand curve is not horizontal.
4. Note that a perfectly inelastic demand curve means quantity demanded does not change with price, which is not typical for a monopoly's market demand.
5. Conclude that the monopoly faces a downward-sloping market demand curve because it must lower price to sell more units, reflecting the trade-off between price and quantity demanded.