A monopolist that does not practice price discrimination should never produce in the
A)Elastic portion of its demand curve because it can increase total revenue and reduce total costs by lowering the price.
B)Inelastic portion of its demand curve because it can increase total revenue and reduce total costs by increasing the price.
C)Inelastic portion of its demand curve because it can increase total revenue by more than it increases total cost by reducing the price.
D)Segment of its demand curve where the price elasticity of demand is greater than 1.

Question

Quizplus · Accepted Answer

In a monopolistic market, a monopolist that does not practice price discrimination will always produce in the inelastic portion of its demand curve because it can increase total revenue and reduce total costs by increasing the price. This is because in the inelastic portion, an increase in price will lead to a small decrease in quantity demanded, resulting in an increase in total revenue due to the high willingness of consumers to pay. Additionally, at this point, the marginal revenue (MR) will be positive, thereby allowing the company to reduce its cost and make more profit.

A Monopolist That Does Not Practice Price Discrimination Should Never