What is TRUE of the price elasticity of demand faced by a monopoly firm?
A) Demand is inelastic.
B) Demand is more elastic at lower prices and more inelastic at higher prices.
C) Demand is perfectly elastic because the monopolist has no competition.
D) Demand becomes more elastic as the range of imperfect substitutes expands.

Question

Quizplus · Accepted Answer

The price elasticity of demand faced by a monopoly firm becomes more elastic as the range of imperfect substitutes expands. This means that as more alternatives become available to consumers, they become less willing to pay the high prices charged by the monopoly and their demand becomes more responsive to changes in price. This can lead to a decrease in the monopolist's market power and could potentially attract new entrants into the market.

What Is TRUE of the Price Elasticity of Demand Faced