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

-Identify the correct statement.
A)A monopolist's pricing decision is limited by the demand for its product.
B)A monopolist is able to choose any price and quantity combination that it desires.
C)A monopolist can increase its profits by increasing price if the demand for its good is relatively elastic.
D)A monopolist does not suffer losses even in the short run.
E)A monopolist is not able to reap positive profits in the long run.

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
 
-Identify the correct statement.
A)A monopolist's pricing decision is limited by the demand for its product. 
B)A monopolist is able to choose any price and quantity combination that it desires. 
C)A monopolist can increase its profits by increasing price if the demand for its good is relatively elastic. 
D)A monopolist does not suffer losses even in the short run. 
E)A monopolist is not able to reap positive profits in the long run.

Quizplus · Accepted Answer

A monopolist's pricing decision is limited by the demand for its product. While a monopolist has the ability to choose any price and quantity combination it wants, the demand for its product will ultimately limit the pricing decision. If the monopolist sets a price too high, it will reduce the quantity demanded and subsequently decrease revenue. Conversely, if the price is too low, the quantity demanded will increase, but this could result in lower profits due to lower prices. Thus, a monopolist must determine the optimal price and quantity combination based on the demand for its product to maximize profits.

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