2. “A monopolist charges the highest price the
market will bear, whereas a perfect competitor
does not.” Explain in detail why you agree or
disagree with this statement. As part of your
answer be sure to describe how a monopolist
determines the profit-maximizing price.
A monopolist does not charge
the highest price the market
MC
will bear. The highest price
P
the market bears is what the
first unit will sell for in the
D
market. The price charged is
on the demand curve above
1
Q
where MR = MC (profit maximization).
MR