The lack of competition within a monopoly means that:

• A. consumers always pay the lowest possible price for the product
• B. the monopolist can set prices above marginal cost without losing all customers
• C. there are many firms producing identical products
• D. market supply and demand always determine the price

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the characteristics of a monopoly. A monopoly is a market structure where a single firm is the sole producer of a product with no close substitutes.
2. Step 2: Recognize that in a monopoly, the firm has market power, meaning it can influence the price of its product rather than taking the market price as given.
3. Step 3: Recall that in competitive markets, firms are price takers and must accept the market price, which equals marginal cost in the long run. However, a monopolist faces the entire market demand curve and can set prices above marginal cost.
4. Step 4: Understand that because the monopolist is the only seller, it does not lose all customers when it raises prices above marginal cost, unlike in perfect competition where buyers would switch to other sellers.
5. Step 5: Conclude that the correct statement is that the monopolist can set prices above marginal cost without losing all customers, which is a direct consequence of the lack of competition.