Suppose that there is only one seller in the computer industry. If the demand curve that the only seller in the industry faces is a straight-line, downward sloping curve, at which point would the seller's total revenue be maximized?
A) at the highest point on the demand curve, where price is the highest
B) at a point high on the demand curve, where elasticity is elastic
C) at the midpoint of the demand curve, where elasticity is unitary
D) at a point low on the demand curve, but not at the very bottom

Question

Quizplus · Accepted Answer

The seller's total revenue is maximized at the midpoint of the demand curve, where the elasticity of demand is unitary. At this point, the increase in revenue from selling one more unit is exactly offset by the decrease in revenue from the decrease in price of all the other units sold. Thus, the seller can sell a larger quantity at a slightly lower price and still earn the same total revenue. If the seller chooses to sell at a higher price and lower quantity, they will earn less total revenue. If they choose to sell at a lower price and higher quantity, they will also earn less total revenue because the increase in quantity sold is offset by the decrease in price.

Suppose That There Is Only One Seller in the Computer