Certified Management Accountant Practice Exam 2025 - Free CMA Practice Questions and Study Guide

In a monopoly, the firm is the sole provider of a product or service, which gives it significant control over the market. A primary goal for a monopolistic firm is to maximize profits, which it can achieve by adjusting its output levels. The firm does this by determining the price at which it can sell its product while considering consumer demand. By controlling the supply of the product and setting the price above the marginal cost, the firm can create economic profits.

Adjusting output allows the monopolist to find the optimal quantity that maximizes its profit, balancing between marginal revenue and marginal cost. Unlike firms in competitive markets, where prices are driven down to the level of marginal cost due to competition, a monopolist can set prices higher due to the lack of direct competition. This behavior is fundamental in monopoly theory and illustrates how monopolists leverage their market power to maximize returns.

Other options presented involve different strategies or goals that are not characteristic of monopolistic behavior. For instance, maximizing market entry barriers can be a means to maintain a monopoly, but it's more a tactic than a goal. Likewise, reducing product quality or increasing competition contradicts the essence of monopolistic control, as these firms thrive on being the exclusive supplier of their products.