For a monopolist with a linear demand curve,total revenue is maximum when:
A)marginal revenue is positive.
B)marginal revenue is at its maximum.
C)the price elasticity of demand is greater than unity.
D)the price elasticity of demand is equal to unity.
E)the marginal revenue is at its minimum.

Question

Quizplus · Accepted Answer

The total revenue for a linear demand curve can be maximized by setting the price where the price elasticity of demand is equal to unity. This occurs when the marginal revenue is zero, which means that increasing or decreasing the price will decrease total revenue. Therefore, the monopolist should set the price where demand is unitary elastic in order to maximize total revenue.

For a Monopolist with a Linear Demand Curve,total Revenue Is