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Homework answers / question archive / Consider the relationship between monopoly pricing and the price elasticity of demand
Consider the relationship between monopoly pricing and the price elasticity of demand.
If demand is inelastic and a monopolist raises its price, quantity would fall by a (smaller, larger) percentage than the rise in price, causing profit to (increase, decrease). Therefore, a monopolist will (always, never, sometimes) produce a quantity at which the demand curve is elastic.
Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal-revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR).
10 Demand Inelastic Demand Max TR Marginal Revenue 012345678910 Quantity 10 9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 aoud
(1)
If demand is inelastic and a monopolist raises its price, quantity would fall by a smaller percentage than the rise in price, causing profit to decrease. Therefore, a monopolist will always produce a quantity at which the demand curve is elastic.
(2)
Total revenue is maximized at midpoint of the demand curve, and the inelastic portion of demand curve is the portion lying to the right of the midpoint of demand curve, shown below.
please see the attached file for the complete solution
