When the demand curve for the profit-maximizing monopolist's product is relatively inelastic:
A) it cannot raise the price of the product above the marginal cost of the product.
B) raising the product's price will lower the total revenue for the product.
C) the product does not have good substitutes.
D) All of these choices are correct.

Question

Quizplus · Accepted Answer

When the demand curve for the monopolist's product is relatively inelastic, it implies that the consumers are not highly responsive to the changes in the price of the product as they do not have good substitutes. As a result, the monopolist has some power to raise the price of the product above the marginal cost and still maintain a considerable quantity of sales. Therefore, option C is correct. Option A is incorrect because the monopolist can raise the price above the marginal cost, given the inelastic demand curve. Option B is incorrect because the monopolist's total revenue increases as the price of the product is raised when the demand curve is relatively inelastic.

When the Demand Curve for the Profit-Maximizing Monopolist's Product Is