Consider the following statement:

"A monopolist always sets price equal to the unitary elastic point on its demand curve."

Is the statement true or false?

The answer is false.

• Although a firm operating in a monopoly market can set the price according to the unitary elastic point on its demand curve, it does not have to in practice. This is because, in a monopoly, the firm is the sole producer and holds the pricing power. Therefore, it is more likely that the monopoly sets the market price according to the profit maximization theory since its objective is to maximize profits.