Asked by Karla Rosas on Jun 11, 2024
Verified
The region of demand in which the monopolist will choose a price-output combination will be
A) inelastic because, as price declines and output increases, total revenue will increase.
B) inelastic because, as price declines and output increases, total revenue will decrease.
C) elastic because, as price declines and output increases, total revenue will decrease.
D) elastic because, as price declines and output increases, total revenue will increase.
Price-Output Combination
The specific level of output and the price at which that output is sold in the market, relevant in contexts of market equilibrium and firm strategies.
Total Revenue
The total amount of money a firm receives by selling goods or services.
Elastic
refers to the responsiveness of demand or supply to changes in price or income.
- Identify and contrast the characteristics of the monopolist's demand curve's elastic and inelastic portions, focusing on their impact on revenue and production activities.
- Pinpoint the situations enabling a monopolist to work in either the elastic or inelastic zones of the demand curve.
Verified Answer
VP
Vincent PatturelliJun 16, 2024
Final Answer :
D
Explanation :
In the elastic region of demand, when a monopolist lowers the price, the percentage increase in quantity demanded is greater than the percentage decrease in price, leading to an increase in total revenue. This makes the elastic region more favorable for a monopolist seeking to maximize profits.
Learning Objectives
- Identify and contrast the characteristics of the monopolist's demand curve's elastic and inelastic portions, focusing on their impact on revenue and production activities.
- Pinpoint the situations enabling a monopolist to work in either the elastic or inelastic zones of the demand curve.