Which one of the following statements about a monopoly is false?

• A. A monopoly can set the price of its product without considering consumer demand.
• B. A monopoly is the sole seller of a product with no close substitutes.
• C. A monopoly faces a downward-sloping market demand curve.
• D. Barriers to entry help maintain monopoly power in a market.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the definition of a monopoly. A monopoly is a market structure where a single firm is the sole seller of a product with no close substitutes.
2. Step 2: Recognize that because the monopolist is the only seller, it faces the entire market demand curve, which is typically downward sloping. This means the monopolist must consider consumer demand when setting prices.
3. Step 3: Recall that a monopolist cannot set any price arbitrarily without regard to demand; the price and quantity sold are interdependent because the demand curve shows the relationship between price and quantity demanded.
4. Step 4: Identify that barriers to entry (such as high startup costs, legal restrictions, or control of key resources) prevent other firms from entering the market, thus maintaining the monopoly's market power.
5. Step 5: Evaluate each statement in the problem against these concepts to determine which one is false, focusing on the monopolist's ability to set price without considering demand.