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 apercentage than the rise in price, causing profit toTherefore, a monopolist willproduce 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).(?10DemandInelastic Demand65Max TR321-1-2Marginal Revenue-3-4123457 8 9 10Quantity

The monopoly is a market which has a single seller and many buyers in the market. The monopoly would…

If demand is inelastic and a monopolist raises its price, quantity would fall by a v percentage than the rise in price, causing profit to . Therefore, a monopolist will v produce a quantity at which the demand curve is elastic.

If demand is inelastic and a monopolist raises its price, quantity would fall by a v percentage than the rise in price, causing profit to . Therefore, a monopolist will v produce a quantity at which the demand curve is elastic.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.2P

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Question

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
percentage than the rise in price, causing profit to
Therefore, a monopolist will
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
6
5
Max TR
3
2
1
-1
-2
Marginal Revenue
-3
-4
1
2
3
4
5
7 8 9 10
Quantity

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