The following table shows the total revenue and total cost for a monopolist at various levels of output.
Table 11-2 $$\begin{array} { | c | c | c | }
\hline \text { Output } & \text { Total Revenue } & \text { Total Cost } \
\hline 1 & 12 & 22 \
\hline 2 & 26 & 26 \
\hline 3 & 50 & 32 \
\hline 4 & 58 & 40 \
\hline 5 & 60 & 51 \
\hline 6 & 61 & 66 \
\hline 7 & 58 & 86 \
\hline 8 & 48 & 112 \
\hline 9 & 36 & 142 \
\hline
\end{array}$$
-Refer to Table 11-2.At an output of 9 units,the price elasticity of demand _____.
A)is more than one.
B)is less than one.
C)is equal to one.
D)cannot be determined without more data.

Question

The following table shows the total revenue and total cost for a monopolist at various levels of output.
Table 11-2 $$\begin{array} { | c | c | c | } 
\hline \text { Output } & \text { Total Revenue } & \text { Total Cost } \
\hline 1 & 12 & 22 \
\hline 2 & 26 & 26 \
\hline 3 & 50 & 32 \
\hline 4 & 58 & 40 \
\hline 5 & 60 & 51 \
\hline 6 & 61 & 66 \
\hline 7 & 58 & 86 \
\hline 8 & 48 & 112 \
\hline 9 & 36 & 142 \
\hline
\end{array}$$
-Refer to Table 11-2.At an output of 9 units,the price elasticity of demand _____.
A)is more than one.
B)is less than one.
C)is equal to one.
D)cannot be determined without more data.

Quizplus · Accepted Answer

At an output of 9 units, the total revenue is $36. We know that the monopolist is facing a downward sloping demand curve, so in order to sell more, they must lower the price. However, since they are a monopolist, they have some market power and can raise the price without losing all their customers. Therefore, we know that the elasticity of demand is less than one.

The Following Table Shows the Total Revenue and Total Cost