A pure monopolist should never produce in the
A) elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering price.
B) inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price.
C) inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price.
D) segment of its demand curve, where the price elasticity coefficient is greater than one.

Question

Quizplus · Accepted Answer

A pure monopolist should produce in the inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price. In the inelastic segment, the price elasticity coefficient is less than one, which means that a price increase causes a proportionately smaller decrease in quantity demanded. Therefore, the monopolist can increase price and have a smaller decrease in quantity demanded, leading to an increase in total revenue. Additionally, since the monopolist is the sole producer in the market, it can also reduce total cost through economies of scale by producing more in the inelastic segment.

A Pure Monopolist Should Never Produce in the