When a firm operates under conditions of a monopoly, its price is constrained by demand.

Question

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When a firm operates under conditions of a monopoly, it has the power to set the price because it is the only seller in the market. However, it still needs to consider the demand for its product and the willingness of consumers to pay a certain price. The firm wants to maximize its profits, but it cannot set a price that is too high that it would discourage customers from buying, or too low that it would not generate enough revenue to cover the costs of production. Therefore, the price is constrained by demand.

When a Firm Operates Under Conditions of a Monopoly, Its