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stars_and_moon stars_and_moon
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7 years ago
Why might a monopoly choose to charge a price lower than the profit-maximizing price?
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wrote...
#1
7 years ago
If a firm faces a strong threat of potential competition from new producers or new products, it might practice price limiting.  This means the monopolist charges the highest price customers will pay, subject to the limit that the price not be so high that it attracts potential competitors.  In this sense the monopolist is willing to reduce short-run profit in order to earn more profit in the long run by keeping competitors away.
wrote...
#2
7 years ago
I compared your answer with a buddy, and it matches

Thanks
wrote...
#3
7 years ago
Great! Now we can move on to the next one
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