In a standard market-setting model, the demand curve facing a single-price monopolist is always which of the following?

• A. Perfectly inelastic because consumers have no substitutes at any price
• B. Downward sloping because the monopolist is the sole seller and the market demand curve is downward sloping
• C. Perfectly elastic because the monopolist can sell any quantity at the market price
• D. Upward sloping because higher prices always increase quantity demanded through a Veblen effect

Answer: (B)

Verified step by step guidance

1. Understand the nature of a monopolist: A single-price monopolist is the sole seller in the market, meaning it faces the entire market demand curve.
2. Recall the shape of the market demand curve: In most cases, the market demand curve is downward sloping, indicating that as price decreases, quantity demanded increases, and vice versa.
3. Analyze why the demand curve is not perfectly inelastic: Perfectly inelastic demand means quantity demanded does not change with price, which is unrealistic here because consumers typically respond to price changes.
4. Consider why the demand curve is not perfectly elastic: Perfectly elastic demand means the firm can sell any quantity at a fixed price, which applies to firms in perfectly competitive markets, not monopolists.
5. Recognize that the monopolist's demand curve is downward sloping because it faces the entire market demand, and higher prices lead to lower quantity demanded, consistent with standard microeconomic theory.