If a monopolist were to produce in the inelastic segment of its demand curve,
A)total revenue would be at a maximum.
B)marginal revenue would be positive.
C)the firm would not be maximizing profits.
D)it would necessarily incur a loss.

Question

Quizplus · Accepted Answer

Producing in the inelastic segment of the demand curve means that the percentage change in quantity demanded is less than the percentage change in price. In this region, marginal revenue (MR) is negative because an increase in price leads to a proportionally larger decrease in quantity sold, reducing total revenue. For a monopolist, profit maximization occurs where marginal cost (MC) equals marginal revenue (MR). Since MR is negative in the inelastic segment, the monopolist would not be maximizing profits by producing in this segment.

If a Monopolist Were to Produce in the Inelastic Segment