Under monopoly, as under competition, price is regulated by supply and demand, with the difference that in the case of monopoly the supply is artificially regulated by the monopolist in his endeavor to fix prices. The result of this distinction is that as a rule competitively produced goods sell at prices proportionate to their marginal costs of production, whereas monopoly goods sell at prices which the monopolists consider most conducive to their own profits. The law of monopoly price, therefore, is that the monopolist tends to fix the price of his product at the point which will yield him the largest profits.

The point at which the monopolist will tend to fix the price of his product will not be the highest price which he can obtain, for if he were to fix the price at this point he would lose many sales which he needs to make in order to secure the maximum profit. Neither will the monopoly price be at a point which will secure the largest number of sales. In fixing monopoly price the monopolist must consider both price and number of sales.