Which of the following describes a correct relation between price elasticity of demand and a monopolist's marginal revenue when inverse demand is linear, P = a-bQ?

Question

Quizplus · Accepted Answer

When inverse demand is linear, the monopolist's marginal revenue (MR) is also linear and twice as steep as the demand curve. Therefore, when MR = 0, demand is unit elastic. The point where MR = 0 occurs at Q = a/2b. When Q is less than a/2b, MR is negative, indicating that demand is elastic. When Q is greater than a/2b, MR is positive, indicating that demand is inelastic. Therefore, choice D is correct.

Which of the Following Describes a Correct Relation Between Price