When marginal cost is greater than zero, the profit-maximizing point price elasticity of demand must be:

Question

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When marginal cost is greater than zero, the profit-maximizing point occurs where marginal cost equals marginal revenue. At this point, the price elasticity of demand is equal to one. However, since marginal cost is greater than zero, the profit-maximizing price will always be higher than the point at which demand is unit elastic. This means that the price elasticity of demand at the profit-maximizing point must be greater than one, indicating a relatively elastic demand.

When Marginal Cost Is Greater Than Zero, the Profit-Maximizing Point