A monopoly firm expands its output and lowers its price. The firm finds that its total revenue falls. Hence, the firm is producing in the
A) elastic range of its demand curve.
B) inelastic range of its demand curve.
C) elastic range of its supply curve.
D) inelastic range of its supply curve.

Question

Quizplus · Accepted Answer

When a monopoly firm lowers its price and total revenue falls, it indicates that the demand is inelastic in that range. Inelastic demand means that the percentage change in quantity demanded is less than the percentage change in price, leading to a decrease in total revenue when price decreases.

A Monopoly Firm Expands Its Output and Lowers Its Price