The region of demand in which the monopolist will choose a price-output combination will be
A) inelastic because, as price declines and output increases, total revenue will increase.
B) inelastic because, as price declines and output increases, total revenue will decrease.
C) elastic because, as price declines and output increases, total revenue will decrease.
D) elastic because, as price declines and output increases, total revenue will increase.

Question

Quizplus · Accepted Answer

A monopolist will choose a price-output combination in the elastic region of demand because as price declines and output increases, total revenue will increase. In the inelastic region, as price declines and output increases, total revenue will decrease, which is not desirable for the monopolist. Therefore, the monopolist will look for a price-output combination in the elastic region to maximize their profits.

The Region of Demand in Which the Monopolist Will Choose