Answer to Question #228108 in Microeconomics for Emy

Question

“Since there are no close substitutes for the monopoly's product, the monopoly can charge 

any price it wishes”.Is it a true or false statement? Give your reasons

Answer 1

The statement is false

A monopoly can raise the product without worrying about the competitor actions. However, monopoly can't charge any price it wants because even if they have less competition consumers do not have to purchase their product. As the monopoly increases the price, quantity demanded falls (law of demand).