If the price elasticity of demand is less than 1, a monopoly's A

Economics Jan 19, 2021

If the price elasticity of demand is less than 1, a monopoly's

A. marginal revenue is undefined.

B. total revenue decreases when the firm lowers its price.

C. total revenue increases when the firm lowers its price.

D. marginal revenue is zero.

Expert Solution

If the price elasticity of demand is less than 1, a monopoly's B. total revenue decreases when the firm lowers its price.

When price elasticity is less than 1, demand is said to be inelastic. That means that the price and the total revenue move in the same direction. Thus, a decrease in price will decrease the monopolist's total revenue.

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