A pure monopolist should never produce in the
A)elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering price.
B)inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price.
C)inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price.
D)segment of its demand curve, where the price elasticity coefficient is greater than one.

Question

Quizplus · Accepted Answer

A monopolist should not produce in the inelastic segment of its demand curve because, in this segment, lowering the price increases total revenue. However, since demand is inelastic, the percentage change in quantity demanded is less than the percentage change in price, leading to a decrease in total revenue if the price is lowered. Therefore, the monopolist can increase total revenue by increasing the price in the inelastic segment.

A Pure Monopolist Should Never Produce in the