1. Monopolist & Elasticity of Demand (5 points) Price peruni Panel (a) Dollars P
ID: 1116876 • Letter: 1
Question
1. Monopolist & Elasticity of Demand (5 points) Price peruni Panel (a) Dollars Panel (b) Total revenue Demand curve Curve C Quantity per period Quantity per period If price is higher than P, a decrease in price (but not below P) will result in a(n) Revenue. In Panel (a), Curve C is the In Panel (b), the portion of the Total Revenue Curve past the quantity of Q illustrates demand a. in Total b. curve c. d. In order to maximize revenue, the Monopolist should produce at point G b. FALSE a. TRUE e. A monopolist may sometimes produce on the inelastic portion of the market Demand curve a. TRUE b. FALSEExplanation / Answer
Answer
the curve C is marginal revenue curve and so if the price is above P then the MR is positive which means the demand is elastic and the decrease in price will increase total revenue, the revenue is maximum where MR=0, where demand is unit elastic
a)
increases
b)
marginal revenue
c)
unit elastic demand
d)
true, because at this point the revenue is maximum and marginal revenue is zero
e)
false
to maximize profit monopolist produces at MR=MC, and the MC is not negative so the monopolist will produce at the portion of an elastic demand curve.
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