Given your answers to the previous questions, a monopolist will produce on the portion of the demand curve that is _______.Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aelasticbinelasticcperfectly elasticdeither elastic or inelastic
Question
Given your answers to the previous questions, a monopolist will produce on the portion of the demand curve that is _______.Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aelasticbinelasticcperfectly elasticdeither elastic or inelastic
Solution
A monopolist will produce on the portion of the demand curve that is elastic. This is because in the elastic portion of the demand curve, the percentage change in quantity demanded is greater than the percentage change in price. This means that the monopolist can increase total revenue by reducing price, as the increase in quantity sold will more than offset the lower price. In contrast, in the inelastic portion of the demand curve, a decrease in price would lead to a less than proportionate increase in quantity demanded, reducing total revenue. Therefore, a monopolist has an incentive to operate in the elastic portion of the demand curve.
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