Which of the following seems the most likely pricing approach for a monopoly?
A) Charge customers whatever you please.
B) Give customers a real bargain by charging a low price.
C) Charge a price that will not cause consumer demand to drop.
D) Undercut the prices charged by competitors.
E) Agree with competitors to fix prices so that profit margins can be maintained.

Question

Quizplus · Accepted Answer

A monopoly has the power to set prices, but they must be careful not to charge a price that will cause consumer demand to drop drastically. This is because a monopoly is the only supplier in the market, and if consumer demand drops, their total revenue will decrease. Therefore, it is likely that a monopoly will try to find the price point that maximizes their profit without significantly reducing consumer demand.

Which of the Following Seems the Most Likely Pricing Approach