The profit-maximizing monopolist will never operate in a price range over which
A) the demand curve slopes downward.
B) demand is inelastic.
C) P MR.
D) P MC.

Question

The profit-maximizing monopolist will never operate in a price range over which
A) the demand curve slopes downward.
B) demand is inelastic.
C) P > MR.
D) P > MC.

Quizplus · Accepted Answer

A profit-maximizing monopolist will avoid operating in a price range where demand is inelastic because in this range, lowering the price will increase total revenue. When demand is inelastic, consumers are not very responsive to price changes, meaning a price increase would lead to a proportionally smaller decrease in quantity demanded, increasing total revenue. Conversely, in the elastic portion of the demand curve, lowering prices leads to a proportionally larger increase in quantity demanded, which can increase total revenue and potentially profits.

The Profit-Maximizing Monopolist Will Never Operate in a Price Range