Future Business Leaders of America (FBLA) Marketing Practice Test

What is the characteristic of the demand curve for a monopoly?

1. It slopes downward

2. It appears straight

3. It fluctuates with market conditions

4. It has multiple peaks

The correct answer is: It appears straight

The characteristic of the demand curve for a monopoly is that it slopes downward. This means that as the price decreases, the quantity demanded increases. This downward slope is a result of monopolies being the sole producer in the market, which gives them control over the price of their goods or services. Since there are no close substitutes for the monopoly's product, consumers will generally buy more when the price is lowered, reflecting a negative relationship between price and quantity demanded. The demand curve for a monopoly is typically not straight; instead, it typically curves downward, indicating a decrease in revenue per item sold as the quantity increases. This results from a monopolist needing to lower prices to sell more units, which is not represented by a straight line. Additionally, demand curves do not fluctuate with market conditions in the same way competitive markets might—monopolists can set their prices based on their market power rather than market fluctuations. Lastly, a monopoly will not have multiple peaks; instead, it has a single, downward-sloping demand curve reflecting its unique position in the market.