Final answer:
The claim that a monopoly can't charge excessively high prices because this would reduce the quantity sold, and hence revenue, is true. Monopolies decide product prices by choosing output quantities, aiming to balance price and quantity to maximize profit under demand constraints.
Step-by-step explanation:
The statement that a monopoly can't charge too much because a high price reduces the quantity that its customers buy is true. A monopolist controls the market price by deciding the quantity of output to produce. However, the monopolist's pricing power is constrained by the demand for the product. Total revenue for a monopolist will be low at both extremes: low quantities of output and very high quantities of output.
This is because at low quantities not much is being sold, and at very high quantities, the product will only sell at a low price. The monopolist aims to find a profit-maximizing balance between the price it charges and the quantity it sells, as illustrated in Figure 9.3 where different price and quantity combinations such as points R (low price, high quantity) and S (high price, low quantity) are available choices.