Asked by Latroy Mayfield on Jul 22, 2024
Verified
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
A portion of the demand curve where the price elasticity of demand is less than one, indicating consumers' insensitivity to price changes.
Total Revenue
It refers to the total receipts from sales of goods or services sold by a company during a particular period.
- Distinguish between the elastic and inelastic segments of the monopolist's demand curve and their implications for revenue and production.
- Identify the profit-maximizing behavior of monopolists under various market conditions.
Verified Answer
TG
Tanner GardinerJul 27, 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 region, marginal revenue (MR) is negative because an increase in price leads to a proportionally larger decrease in quantity sold, reducing total revenue. For a monopolist, profit maximization occurs where marginal cost (MC) equals marginal revenue (MR). Since MR is negative in the inelastic segment, the monopolist would not be maximizing profits by producing in this segment.
Learning Objectives
- Distinguish between the elastic and inelastic segments of the monopolist's demand curve and their implications for revenue and production.
- Identify the profit-maximizing behavior of monopolists under various market conditions.