Which statement concerning monopolists and a product's price is true?

• A. A monopolist must always set the price equal to marginal cost to maximize profit.
• B. A monopolist cannot influence the market price of its product.
• C. A monopolist can set the price above marginal cost and still sell its product.
• D. A monopolist faces a perfectly elastic demand curve.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the nature of a monopolist's market power. A monopolist is the sole seller of a product with no close substitutes, which means it has some control over the price of its product.
2. Step 2: Recall that a monopolist faces a downward-sloping demand curve, meaning it can choose the price but must consider how quantity demanded changes with price.
3. Step 3: Recognize that profit maximization for a monopolist occurs where marginal revenue (MR) equals marginal cost (MC), not necessarily where price equals MC.
4. Step 4: Since the demand curve is downward sloping, the price set by the monopolist is typically above marginal cost, allowing the monopolist to earn positive economic profits.
5. Step 5: Contrast this with perfect competition, where firms are price takers and must set price equal to marginal cost; a monopolist does not face a perfectly elastic demand curve.