The price elasticity of demand for a monopolist
A) is infinite since the monopolist is the only firm in the market.
B) decreases as more competition occurs in the market.
C) increases as similar products enter the market.
D) is undefined due to the lack of competition.

Question

Quizplus · Accepted Answer

The price elasticity of demand for a monopolist increases as similar products enter the market. This is because, in the presence of close substitutes, consumers have more options and may switch to other products if the monopolist raises its price. However, if the monopolist is the only supplier of a product or if there are no close substitutes, the demand for the monopolist's product is likely to be less elastic as consumers have no alternative options.

The Price Elasticity of Demand for a Monopolist