The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

-A monopolist can charge a high price if:
A)the quantity demanded of its product is positively related to price.
B)the demand for its product is relatively price-elastic.
C)the demand curve for its product is negatively sloped.
D)the demand for its product is relatively price-inelastic.
E)there exist a large number of substitutes for its product.

Question

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4
 
-A monopolist can charge a high price if:
A)the quantity demanded of its product is positively related to price. 
B)the demand for its product is relatively price-elastic. 
C)the demand curve for its product is negatively sloped. 
D)the demand for its product is relatively price-inelastic. 
E)there exist a large number of substitutes for its product.

Quizplus · Accepted Answer

When the demand for a monopolist's product is relatively price-inelastic, the monopolist can charge a high price without losing too much of the market share to other substitutes. This is because the consumers are not very sensitive to changes in price and are willing to pay a higher price for the same product. Therefore, the monopolist can maximize profits by charging a higher price.

The Table Given Below Shows the Price, Marginal Revenue and Marginal