The monopolist should NEVER produce in the
A) elastic segment of its demand curve because it can increase total revenue and reduce total cost by lowering price.
B) inelastic segment of its demand curve because further lowering of the price reduces total revenue.
C) range of output for which the price elasticity of demand is infinity.
D) range of output for which there is a price elasticity exceeding one.

Question

Quizplus · Accepted Answer

The monopolist should never produce in the inelastic segment of its demand Curve because further lowering of the price in this segment reduces total revenue. This is because the increase in the quantity demanded due to the price reduction is not large enough to offset the revenue lost from the lower price. Therefore, the monopolist should always aim to produce in the elastic segment of the demand curve, where lowering the price will lead to more significant increases in quantity demanded and higher total revenue.

The Monopolist Should NEVER Produce in the