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
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter13: Antitrust And Regulation
Section: Chapter Questions
Problem 10SQP
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Consider the relationship between
Transcribed Image Text: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
4
3
1
0
-1
-2
-3
-4
-5
0
Demand
1
2
3
4
Marginal Revenue
5 6 7 8 9
Quantity
9 10
Inelastic Demand
++
Max TR
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