At any point where a monopolist's marginal revenue is positive, the downward-sloping straight-line demand curve is:
A) perfectly elastic.
B) elastic, but not perfectly elastic.
C) unit elastic.
D) inelastic.

Question

Quizplus · Accepted Answer

A downward-sloping straight-line demand curve cannot be perfectly elastic, as it implies that the slightest change in price will cause an infinite change in quantity demanded, which is not realistic. At the same time, the curve cannot be inelastic, as this would mean that consumers are insensitive to changes in price, which contradicts the notion of a monopolist's market power. Therefore, the curve must be elastic, but not perfectly elastic, when the marginal revenue is positive.

At Any Point Where a Monopolist's Marginal Revenue Is Positive