A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will
A) increase total revenue, increase total cost, and decrease profit.
B) decrease total revenue, increase total cost, and decrease profit.
C) increase total revenue, decrease total cost, and decrease profit.
D) decrease total revenue, total cost, and profit.

Question

Quizplus · Accepted Answer

In the inelastic range of the demand curve, lowering the price decreases total revenue because the percentage drop in price is greater than the percentage increase in quantity demanded. This also increases total cost due to higher output, leading to decreased profit.

A Pure Monopoly Firm Will Never Charge a Price in the Inelastic