Which of the following is true of a monopolist in the short run?
A)It can charge whatever price it wants.
B)It charges more than what consumers are willing to pay.
C)It is constrained by marginal cost in setting price.
D)It is constrained by consumer demand in setting price.
E)It always earns an economic profit.

Question

Which of the following is true of a monopolist in the short run?​
A)It can charge whatever price it wants.
B)It charges more than what consumers are willing to pay.
C)It is constrained by marginal cost in setting price.
D)It is constrained by consumer demand in setting price.
E)It always earns an economic profit.

Quizplus · Accepted Answer

In the short run, a monopolist is constrained by consumer demand in setting price. The monopolist needs to consider the price elasticity of demand when deciding on the price. If the monopolist charges a very high price, it will lose all its customers, and if it charges a very low price, it will not be able to cover its costs. Therefore, the monopolist needs to find the price that maximizes its profit given the demand it faces.

Which of the Following Is True of a Monopolist in the Short