The market demand curve that a monopoly faces implies that
A)the law of demand is still at work.
B)cost does not matter.
C)the monopoly can increase price indiscriminately and consumers have no choice but to pay it.
D)the monopoly does not have to be concerned about making profits.
E)an increase in output will not affect price.

Question

Quizplus · Accepted Answer

The market demand curve that a monopoly faces still follows the law of demand which states that as the price of a good increases, the quantity demanded decreases. However, since a monopoly has no competition, it has some degree of market power and can increase price above the competitive level without losing all its customers. Therefore, the monopoly must consider the trade-off between price and quantity demanded in order to maximize profits.

The Market Demand Curve That a Monopoly Faces Implies That