The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4

-A monopolist faces the least price-elastic demand curve because:
A)the consumers have only one place to buy the good.
B)the monopolist produces a standardized product.
C)the monopolist undertakes a huge expenditure to produce the product.
D)the monopolist supplies to an insignificant portion of the market.
E)the monopolist produces an absolutely necessary good having close substitutes.

Question

The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4
 
-A monopolist faces the least price-elastic demand curve because:
A)the consumers have only one place to buy the good. 
B)the monopolist produces a standardized product. 
C)the monopolist undertakes a huge expenditure to produce the product. 
D)the monopolist supplies to an insignificant portion of the market. 
E)the monopolist produces an absolutely necessary good having close substitutes.

Quizplus · Accepted Answer

A monopolist faces a downward-sloping demand curve, but the extent to which the quantity demanded changes in response to a change in price (i.e. the price elasticity of demand) is relatively low. This is because the monopolist is the sole supplier of the product, and consumers have limited alternatives to turn to. Therefore, Choice A is the correct answer. The other options (B, C, D, and E) do not explain why a monopolist faces a less elastic demand curve.

The Figure Given Below Shows the Revenue and Cost Curves