A monopolist
A) can charge whatever price it wants because it is the only firm producing the good.
B) can usually keep price equal to marginal revenue by lowering the price on the last unit sold only.
C) faces a demand curve that is more elastic than the demand curve for the industry.
D) is constrained in its pricing decisions by the demand curve it faces.

Question

Quizplus · Accepted Answer

A monopolist is constrained in its pricing decisions by the demand curve it faces. The monopolist has market power but faces a downward sloping demand curve for its product, so in order to maximize profit, it must take into account the impact that a change in price will have on the quantity demanded. Unlike in a perfectly competitive market, the monopolist cannot simply charge whatever price it wants, because doing so would result in no sales at all.

A Monopolist