Are major-league baseball clubs profit-maximizing monopolies? Some observers of

Question

Are major-league baseball clubs profit-maximizing monopolies? Some observers of this market have contended that baseball club owners want to maximize attendance or revenue. Alexander (2001) says that one test of whether a firm is a profit-maximizing monopoly is to check whether the firm is operating in the elastic portion of its demand curve (which he finds is true). Why is that a relevant test? What would the elasticity be if a baseball club were maximizing revenue? 0 A. If a firm were operating in the elastic portion of the demand curve, it could raise its price and increase profit. Revenue is maximized when elasticity equals-1 O B. If a firm were operating in the inelastic portion of the demand curve it could raise its price and increase profit. Revenue is maximized when elasticity equals 0 O C. If a firm were operating in the elastic portion of the demand curve, it could raise its price and increase profit. Revenue is maximized when elasticity equals 0 0 D. If a firm were operating in the inelastic portion of the demand curve, it could raise its price and increase profit Revenue is maximized when elasticity equals

Explanation / Answer

Answer
Option D
The firm is maximizing profit when increase price at inelastic demand because the change in quantity because of price is lower so the firm will increase profit
also, the revenue is maximum at the elasticity of -1

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