Question

Why would a monopolist not charge the highest price possible? Include appropriate terminology that supports your reasoning.

Answer 1

Monopolists obviously can not raise the prices they want. The demand for their goods or services may be less flexible than most other companies ' demand, but the demand curve is still sloping downward. To order to maximize their profits, monopolists can not raise their prices indiscriminately.
It is true that customers can not buy the products of a rival if their costs are increased by a monopolist. That doesn't say, though, that they have no choice but to buy. Let's think, for example, of a small town whose airport is served only by one airline. People can't choose a rival airline from that town

If the airline servicing the city raises its prices too high, however, many people will probably choose not to travel at all. Which means the airline can not simply raise the prices as high as it likes.
Industries increase their profits in all market systems by generating the quantity of goods where their marginal cost is equal to their marginal income. There is no different from a monopolist. It considers this point and charges the price at which people are demanding the amount of goods.