To maximize profits, the monopolist should set a higher price in a market with ______ demand.
A) more elastic
B) unit elastic
C) more inelastic
D) weaker

Question

Quizplus · Accepted Answer

Monopolists should set a higher price in markets with more inelastic demand because consumers are less likely to switch to substitutes when the price increases. This allows the monopolist to charge a higher price without losing too many customers, leading to higher profits. In markets with more elastic demand, consumers are more likely to switch to substitutes when prices increase, so the monopolist must keep prices lower to maintain their market share.

To Maximize Profits, the Monopolist Should Set a Higher Price