If a monopolist has no marginal costs and only recurring fixed costs, then, if he produces, any quantity that he produces is profit maximizing if the price elasticity of market demand is -1.

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If the monopolist has no marginal costs, his marginal revenue is equal to the market price. Therefore, he should keep producing until marginal revenue equals his fixed costs. If the price elasticity of demand is -1, this means that a 1% increase in price leads to a 1% decrease in quantity demanded. Therefore, if the monopolist increases the price, he will lose enough customers to offset the gain from the higher price, resulting in the same total revenue. Hence, any quantity produced will be profit-maximizing.

If a Monopolist Has No Marginal Costs and Only Recurring