When a firm operates under conditions of a monopoly, its price is:
A)constrained by marginal cost
B)constrained by demand
C)constrained only by its social agenda
D)not constrained

Question

Quizplus · Accepted Answer

In a monopoly, the firm has market power and is able to set the price higher than the marginal cost. However, the firm still faces a downward sloping demand curve, meaning that if it sets the price too high, it may lose customers to substitute products or reduced demand. Therefore, the firm's pricing decision is constrained by the demand for its product.

When a Firm Operates Under Conditions of a Monopoly, Its