A monopolist
A)can charge whatever price it wants
B)charges more than almost any consumer is willing to pay
C)is constrained by marginal cost in setting price
D)is constrained by demand in setting price
E)always earns an economic profit

Question

Quizplus · Accepted Answer

A monopolist is constrained by demand in setting the price. That is because there is no other competitor in the market, and a monopolist is the only supplier of the product. If the monopolist increases the price too much, then customers may start looking for alternatives or substitutes, reducing the demand for the monopolist's product. Therefore, the monopolist must carefully consider the demand and elasticity of the market when setting the price.

A Monopolist