If a monopolist's marginal revenue is less than zero over a range of output, then the price elasticity of demand must be:
A)greater than one.
B)equal to one.
C)less than one.
D)equal to zero.
E)less than zero.

Question

Quizplus · Accepted Answer

If marginal revenue is less than zero, it means that an increase in output causes a decrease in total revenue. This implies that the demand curve is elastic (price sensitive), meaning that an increase in price will cause a greater decrease in quantity demanded. Therefore, the price elasticity of demand must be greater than one (in absolute value), which corresponds to a demand curve that is more elastic (flatter).

If a Monopolist's Marginal Revenue Is Less Than Zero Over