A profit-maximizing monopoly with a straight-line demand will never produce when demand is inelastic because
A)price would be negative.
B)consumers would buy nothing.
C)revenue would be rising as cost falls.
D)marginal revenue would be negative and could not equal marginal cost.
E)there would be too few potential customers.

Question

Quizplus · Accepted Answer

In a straight-line demand curve, when demand is inelastic, marginal revenue is negative. In order to maximize profit, a monopoly should produce at the output level where marginal cost equals marginal revenue. However, in this case, marginal revenue is negative, which means that producing any units at all would result in a loss of profit. Therefore, the monopoly will not produce any output when demand is inelastic.

A Profit-Maximizing Monopoly with a Straight-Line Demand Will Never Produce