A monopoly is charging $500 for its product and at this price, the price elasticity of demand is 1.0. What is its marginal revenue?

Question

Quizplus · Accepted Answer

When the price elasticity of demand is equal to 1, it means that the percentage change in quantity demanded is exactly equal to the percentage change in price, indicating unit elasticity. In this case, the marginal revenue, which is the additional revenue the firm earns by selling one more unit of the product, is zero. This is because the increase in revenue from selling additional units is exactly offset by the decrease in revenue per unit due to the price reduction necessary to sell those additional units.

A Monopoly Is Charging $500 for Its Product and at This