Question

Evaluate the following statement by an antitrust lawyer. ""Monopolies always want to charge the highest price the market will bear.""

a. Both a monopoly and a competitive firm charge the highest price the market will bear.

b. It is more accurate in describing a perfectly competitive firm’s behavior.

c. It is accurate in describing a monopoly’s behavior.

d. Neither firm will charge the highest price the market will bear.

Answer 1

A monopoly firm, surrounded by barriers to entry, can charge any price for its product, but the price is still constrained by the demand for the product. The statement made by the antitrust lawyer is accurate in describing a monopoly's behavior.

Step-by-step explanation:

A monopoly firm, surrounded by barriers to entry, can charge any price for its product, but the price is still constrained by the demand for the product. Unlike a perfectly competitive firm, a monopoly firm faces a downward-sloping demand curve. The statement made by the antitrust lawyer is accurate in describing a monopoly's behavior, as the monopolist aims to maximize its profits by choosing the combination of price and quantity that maximizes its profit.