What is true of the price elasticity of demand faced by a monopoly firm?
A) Demand is inelastic.
B) Demand is more elastic at lower prices and more inelastic at higher prices.
C) Demand is perfectly elastic because the monopolist has no competition.
D) Demand becomes more elastic as the range of imperfect substitutes expands.

Question

Quizplus · Accepted Answer

The price elasticity of demand faced by a monopoly firm becomes more elastic as the range of imperfect substitutes expands. This is because as the range of substitutes expands, consumers have more options to switch to and hence become more price-sensitive. Therefore, the monopolist cannot increase prices without losing a significant portion of its market share.

What Is True of the Price Elasticity of Demand Faced