Multiple Choice QuestionThe monopolist wants a price-quantity combination to fall in the Blank______ section of its demand curve, where a lower price means Blank______ total revenue.Multiple choice question.inelastic; greaterunit-elastic; greaterlower; greaterelastic; greatermid; greater
Question
Multiple Choice QuestionThe monopolist wants a price-quantity combination to fall in the Blank______ section of its demand curve, where a lower price means Blank______ total revenue.Multiple choice question.inelastic; greaterunit-elastic; greaterlower; greaterelastic; greatermid; greater
Solution
The correct answer is "inelastic; greater".
Here's why:
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The demand curve of a monopolist is downward sloping. This means that as the price decreases, the quantity demanded increases.
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The demand curve can be divided into two sections: the elastic section and the inelastic section. In the elastic section, a decrease in price leads to a more than proportionate increase in quantity demanded, leading to an increase in total revenue. In the inelastic section, a decrease in price leads to a less than proportionate increase in quantity demanded, leading to a decrease in total revenue.
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Therefore, a monopolist would want to operate in the inelastic section of its demand curve, where a lower price would lead to greater total revenue. This is because in this section, the increase in quantity sold more than compensates for the decrease in price, leading to an overall increase in total revenue.
Similar Questions
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Multiple Choice QuestionDemand for monopolistically competitive firms is Blank______.Multiple choice question.more inelastic than demand for pure monopolies due to the presence of rival firmsmore elastic than demand for firms in pure competition due to product homogeneityless elastic than demand for pure monopolies due to competitors producing substitutable goodsless elastic than demand for firms in pure competition due to fewer rivals and relative product differentiation
Multiple Choice QuestionA monopolist will never choose a price-quantity combination where price reductions cause:Multiple choice question.a decrease in total revenuea decrease in marginal revenuemarginal revenue to risean increase in total revenue
If a business operating in monopolistic competition wishes to increase its sales volume, it will have to ______.Multiple choice question.lower its price.reduce its costs.
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