An unregulated monopolist produces an output level in the elastic portion of the demand curve because:
A)it is only in this region that price exceeds AC.
B)it is only in this region that MR is positive.
C)TR increases at the same rate as TC; that is, MR = MC.
D)prices, and profits, rise.

Question

Quizplus · Accepted Answer

In the elastic portion of the demand curve, the monopolist can increase its output level without decreasing the price of its product by too much, meaning that MR is positive. Therefore, producing in this region allows the monopolist to increase its revenue and profits. However, if the monopolist produces in the inelastic portion of the demand curve, the increase in output will lead to a decrease in price, causing MR to become negative and ultimately reducing the monopolist's revenue and profits.

An Unregulated Monopolist Produces an Output Level in the Elastic