If marginal cost is positive, which of the following is true?
A)A monopolist always produces on the inelastic portion of the firm's demand curve.
B)A monopolist always produces on the inelastic portion of the market demand curve.
C)A monopolist always produces on the elastic portion of the market demand curve.
D)A monopolist always produces on the unit elastic portion of the market demand curve.
E)The presence of a monopolist increases the elasticity of demand.

Question

Quizplus · Accepted Answer

When marginal cost is positive, a monopolist will always produce on the elastic portion of the market demand curve because producing on the inelastic portion would result in higher prices and lower quantities, which would decrease total revenue. Therefore, the monopolist will want to produce at a quantity where price is relatively low and demand is relatively elastic, allowing for higher quantities and total revenue.

If Marginal Cost Is Positive, Which of the Following Is