A profit-maximizing monopoly will never produce in the inelastic portion of its demand curve.

Question

Quizplus · Accepted Answer

A profit-maximizing monopoly avoids producing in the inelastic portion of its demand curve because doing so would lead to a decrease in total revenue. In the inelastic portion, the percentage change in quantity demanded is less than the percentage change in price, meaning that raising prices would increase revenue, and lowering them would decrease revenue, which is contrary to maximizing profits.

A Profit-Maximizing Monopoly Will Never Produce in the Inelastic Portion