Question

What must a monopoly, such as a public utility, account for when setting its prices? A monopoly, because it has no competitors, can set prices as high as it likes. A monopoly must consider customer demand, and then set prices at the most profitable level. A monopoly must take into account what its top competitors are charging for the same product or service. A monopoly has no say in what prices it will charge because the government sets the prices for all monopolistic industries.

Answer 1

A monopoly must consider customer demand, and then set prices at the most profitable level.

Answer 2

Answer:

A monopoly must consider customer demand, and then set prices at the most profitable level.

Explanation:

A monopoly exists when only one company provides the good or service. Thus, the monopolist has the power to decide the price he will charge in offering the good or service. However, the monopolist cannot simply charge an extremely expensive amount as this will decrease demand. People demand according to their needs and based on the prices charged. Thus, the lower the price charged by the monopolist, the higher the amount sold. However, if he practices a lower price, his profit may be lower even with a high amount sold. Thus, the monopolist must take demand into account and choose the quantity and price that maximize it's profit.