Consider the following AR and MR curves for a single-price monopolist. FIGURE 10-2
-Refer to Figure 10-2.The price elasticity of demand at Q₁ is

Question

Consider the following AR and MR curves for a single-price monopolist. FIGURE 10-2 -Refer to Figure 10-2.The price elasticity of demand at Q₁ is

Quizplus · Accepted Answer

At the output level Q₁, the MR curve intersects the demand curve at a point where the price elasticity of demand is greater than 1. This is because the MR curve lies below the demand curve, indicating that the monopolist is facing a downward-sloping demand curve. When the MR and demand curves intersect, the price elasticity of demand is equal to -1 times the ratio of the price to the quantity demanded, which is greater than 1 in this case. Therefore, the correct answer is D) greater than 1.

Consider the Following AR and MR Curves for a Single-Price