Asked by jessica Musgrave on May 13, 2024

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A pure monopolist should never produce in the:

A) elastic segment of its demand curve because it can increase total revenue and reduce total cost by lowering price.
B) inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.
C) inelastic segment of its demand curve because it can always increase total revenue by more than it increases total cost by reducing price.
D) segment of its demand curve where the price elasticity coefficient is greater than one.

Elastic Segment

A portion of the demand curve where the quantity demanded is highly sensitive to changes in price.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity of it that consumers are willing to purchase at various prices.

Total Revenue

The total income received by a company from its sales of goods or services before any expenses are subtracted.

  • Apprehend the link between the flexibility of demand and the determinations a monopolist makes about pricing and output.
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SM
Sheila MarieMay 19, 2024
Final Answer :
B
Explanation :
A pure monopolist should never produce in the elastic segment of its demand curve because lowering the price will lead to a decrease in total revenue, while producing in the inelastic segment of the demand curve can increase total revenue and reduce total cost by increasing price. The monopolist should try to produce in the inelastic segment of the demand curve to maximize total revenue and profit. In the segment of the demand curve where the price elasticity coefficient is greater than one, the demand is elastic and any increase in price will lead to a decrease in total revenue.