The figure below shows the cost and revenue curves faced by a monopolist. The demand curve faced by the monopolist at the profit-maximizing output is:
Figure 9.1

A)perfectly price elastic.
B)price elastic.
C)price inelastic.
D)unit price elastic.
E)perfectly price inelastic.

Question

The figure below shows the cost and revenue curves faced by a monopolist. The demand curve faced by the monopolist at the profit-maximizing output is: ​
​Figure 9.1

A)perfectly price elastic. 
B)price elastic. 
C)price inelastic. 
D)unit price elastic. 
E)perfectly price inelastic.

Quizplus · Accepted Answer

The profit-maximizing output for the monopolist is where the marginal cost curve intersects the marginal revenue curve. At this point, the monopolist charges a price equal to the demand for the given quantity of output. Looking at the graph, we can see that the marginal cost curve intersects the marginal revenue curve at output level Q1, where the price charged is P1. At this point, the demand curve facing the monopolist is relatively elastic since a small increase in price will result in a relatively large decrease in quantity demanded. Therefore, the correct answer is B.

The Figure Below Shows the Cost and Revenue Curves Faced