Final answer:
Monopoly or market power allows a firm to set its price, as it faces no significant competition. The demand curve still constrains the price a monopolist can charge. The correct answer is C) set its price.
Step-by-step explanation:
Monopoly or market power is the ability of a firm to set its own prices given that it controls all (or nearly all) the supply of a good or service in a given market. This control allows a monopoly to be the sole architect of the price of its product, as it faces no significant competition that would typically drive prices down or affect the quantity supplied. However, it's important to note that while a monopolist can choose the price, the demand curve acts as a constraint since consumers are not compelled to purchase the product at any price, meaning that the monopolist should still consider consumer demand when setting prices.
The correct answer to the question is C) set its price. Even though a monopoly may suggest any price for its product, the demand for the firm's product constrains the price. The monopolist's demand curve is the market demand curve, which is downward-sloping, unlike a perfectly competitive firm's demand curve. Thus, while the monopoly has significant power to influence prices, it must still respond to consumer demand within the market.