The ultimate market constraint on the exercise of market power
A)Is the demand curve facing the monopolist.
B)Is marginal cost pricing.
C)Is the ATC curve facing the monopolist.
D)Is barriers to entry.

Question

Quizplus · Accepted Answer

The demand curve facing the monopolist is the ultimate market constraint on the exercise of market power because if the monopolist sets a price higher than what consumers are willing to pay, they will reduce their demand for the product and may seek substitutes. Thus, the monopolist must consider the elasticity of demand in setting their price in order to maximize profits.

The Ultimate Market Constraint on the Exercise of Market Power