A monopolist will charge a lower price in the market that has _____

Marketing Jan 09, 2021

A monopolist will charge a lower price in the market that has _____.

A. unitary elastic demand

B. less elastic demand

C. more elastic demand

D. perfectly inelastic demand

Expert Solution

The correct answer is C. more elastic demand.

A monopolist will set lower prices if its demand is elastic. A monopolist that faces an elastic demand curve will lose consumers if it increases the price of its product or service. This relationship depends on the market power of the firm, the concentration ratio, and the number of firms that supply a close substitute to the product offered by the monopolist. However, regardless of the type of features in the market, the more elastic the demand, the lower the price must be set.

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