What portion of the demand curve will profit-maximizing monopolists choose to operate on: the inelastic portion or elastic portion? Why?


When demand is inelastic, quantity demanded changes by a smaller percentage than does the price. As a result, a firm could increase total revenue simply by reducing output and raising price. At the same time, reducing output reduces total production costs. If total revenue rises and total costs fall, profit increases. Therefore, a profit-maximizing monopolist should reduce output and increase price until it is no longer operating along the inelastic portion of the demand curve. Rather, a profit-maximizing monopolist will always operate along the elastic portion of the demand curve.

Economics

You might also like to view...

The annuity factor ________ by the amount of the annual payment equals the ________ value of payments for the specified number of years at the specified discount rate.

A) multiplied; future B) divided; present C) divided; future D) multiplied; present

Economics

The major source of tax revenues collected by the Federal government is the corporate income tax

a. True b. False Indicate whether the statement is true or false

Economics

For a given real interest rate, an increase in inflation makes the after-tax real interest rate

a. decrease, which encourages savings. b. decrease, which discourages savings. c. increase, which encourages savings. d. increase, which discourages savings.

Economics

The United States truly became a mass consumption society in

A. the early 1900s. B. the 1920s. C. the 1940s. D. the 1960s.

Economics