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An unregulated monopoly will A
An unregulated monopoly will
A. produce in the elastic range of its demand curve.
B. flood the market with goods to deter entry.
C. produce only where marginal revenue is zero.
D. produce in the inelastic range of its demand curve.
Expert Solution
An unregulated monopoly will A. produce in the elastic range of its demand curve.
For a monopolist, the firm and the industry demand curves are the same. By definition, the demand curve is downward sloping, because consumers will buy more when the price is lower and vice versa. That means that a monopolist can choose either price or output, but not both - the other is determined by consumer demand. Therefore the monopolist will produce in the elastic section of the demand curve, where price and total revenue will move in the same direction. Raising the price will lower the quantity sold, but total revenue will still increase.
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