A monopoly is able to charge a price that is greater than its marginal cost.

Question

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A monopoly has the power to set prices above its marginal cost because it faces no competition. Marginal cost is the additional cost a firm incurs to produce one more unit of output, and in a competitive market, firms are forced to price their products at or near their marginal cost. However, monopolies have the ability to raise prices and maintain their market power, resulting in a higher price than their marginal cost.

A Monopoly Is Able to Charge a Price That Is