Suppose a monopolist must choose between two points on its demand curve.It can either sell 100 units for $3 each or sell 140 units for $2 each.Which of the following is true?
A)The demand for the monopolist's product is price elastic for the given range of output.
B)The demand for the monopolist's product is unit elastic for the given range of output.
C)The demand for the monopolist's product is price inelastic for the given range of output.
D)The monopolist is facing a horizontal supply curve.
E)The monopolist is facing an upward-rising demand curve.

Question

Quizplus · Accepted Answer

The monopolist is facing a downward-sloping demand curve since it has to lower the price to sell more units. Since the price decreases from $3 to $2, the demand is not price elastic but rather price inelastic. If the demand curve were price elastic, a price decrease would result in a proportionally larger increase in quantity demanded, making the sale of 140 units more profitable than selling 100 units. Therefore, the best choice is to sell 100 units for $3 each, which maximizes the monopolist's profit.

Suppose a Monopolist Must Choose Between Two Points on Its