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 larger percentage than the rise in price, causing profit to decrease. Therefore, a monopolist will never 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 9 8 7 6 5 3 2 1 0 -1 -2 -3 -4 -5 0 Demand 1 2 3 5 Quantity 6 Marginal Revenue 7 8 9 10 8]+ Inelastic Demand Max TR

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 larger percentage than the rise in price, causing profit to decrease. Therefore, a monopolist will never 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 9 8 7 6 5 3 2 1 0 -1 -2 -3 -4 -5 0 Demand 1 2 3 5 Quantity 6 Marginal Revenue 7 8 9 10 8]+ Inelastic Demand Max TR

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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