Which of the following statements about the elasticity of demand for a monopolist is TRUE?
A) Since a monopolist produces a good with no close substitutes, the price elasticity of demand for the good is zero.
B) A monopolist produces a good with demand that is perfectly inelastic because people can not do without the good.
C) Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity.
D) Since the demand curve of a monopolist is downward sloping, the demand for the good must be inelastic.

Question

Quizplus · Accepted Answer

While it is true that a monopolist produces a good with no close substitutes, there will still be some degree of substitution available, even if imperfect. Therefore, the demand for the good will not have zero price elasticity. Additionally, it is not true that a monopolist produces a good with demand that is perfectly inelastic because people can always find some substitutes. Furthermore, while the demand curve for a monopolist is downward sloping, the elasticity of demand will depend on the extent to which consumers are able to find substitutes for the good.

Which of the Following Statements About the Elasticity of Demand