Which of the following is true of a monopoly in the short run?
A)It can charge whatever price it wants.
B)It charges more than consumers are willing to pay.
C)It is constrained by marginal cost in setting price.
D)It is constrained by consumer demand in setting price.
E)It always earns an economic profit.

Question

Quizplus · Accepted Answer

A monopoly is constrained by consumer demand in setting price. Its goal is to maximize profit, which means charging the highest price possible without reducing demand too much. However, the monopoly cannot charge any price it wants, because if it charges too high a price, it will lose too many customers and reduce its revenue.

Which of the Following Is True of a Monopoly in the Short