Asked by NOYAN ALI.K on May 25, 2024

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If a monopolist were to produce in the inelastic segment of its demand curve:

A) total revenue would be at a maximum.
B) marginal revenue would be positive.
C) the firm would not be maximizing profits.
D) it would necessarily incur a loss.

Inelastic Segment

The inelastic segment defines a range within the demand curve where the quantity demanded changes very little in response to changes in price. Demand is relatively insensitive to price adjustments.

Total Revenue

The overall sum of money received by a company or individual from the sale of goods or services, before any expenses are subtracted.

Marginal Revenue

The additional income generated from selling one more unit of a good or service, crucial for decision-making in production and pricing strategies.

  • Acquire knowledge on how demand, marginal revenue, and monopoly pricing strategies are interlinked.
  • Elucidate the circumstances that result in allocative and productive inefficiency within a monopolistic market structure.
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CP
Chanchala PathrolMay 26, 2024
Final Answer :
C
Explanation :
Producing in the inelastic segment of the demand curve means that the percentage change in quantity demanded is less than the percentage change in price. In this scenario, lowering the price would increase total revenue, indicating that the firm is not at its profit-maximizing output level. Marginal revenue would be negative, not positive, in the inelastic segment. Total revenue is not maximized in the inelastic segment, and producing in this segment does not necessarily mean the firm incurs a loss; it simply is not maximizing potential profits.