For a monopoly with a straight-line demand curve, when demand is
A)unit-elastic, marginal revenue reaches its maximum.
B)inelastic, marginal revenue is negative.
C)elastic, marginal revenue is positive and increasing.
D)elastic, marginal revenue is greater than demand.
E)perfectly inelastic, marginal revenue equals demand.

Question

Quizplus · Accepted Answer

DFor a monopoly with a straight-line demand curve, when demand is inelastic, marginal revenue is indeed negative because lowering the price to sell one more unit leads to a decrease in total revenue. When demand is elastic, marginal revenue is positive but less than the price (not greater than demand), because selling an additional unit increases total revenue, but at a price lower than the previous unit sold.

For a Monopoly with a Straight-Line Demand Curve, When Demand