Scenario: When a monopolist charges $10 for its product, it sells 500 units of the product. When it lowers the price to $6, it sells 1,400 units of the product.
-Refer to the scenario above.Which of the following statements is true of the demand curve that the monopolist faces in the price range $6 to $10?
A) The demand curve is elastic.
B) The demand curve is inelastic.
C) The demand curve is vertical.
D) The demand curve is upward sloping.

Question

Quizplus · Accepted Answer

The demand curve faced by the monopolist is elastic in the given price range because the change in the quantity demanded is proportionally greater than the change in price. When the price is lowered from $10 to $6, there is an increase in the quantity demanded from 500 units to 1,400 units, which is a proportionally large increase. Therefore, the demand curve is elastic in this price range.

Scenario: When a Monopolist Charges $10 for Its Product, It