GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A monopolist charging high price operates on
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The elastic part of a demand curve
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The inelastic part of a demand curve
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Ignores elasticity of demand altogether
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The constant elastic part of a demand curve
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Explanation:
Detailed explanation-1: -A monopolist never produces in the inelastic zone of the demand curve because it can increase revenue by charging a higher price and producing less. When demand is inelastic, the percentage change in quantity demanded is less than the percentage change in price.
Detailed explanation-2: -A profit-maximizing monopoly firm will therefore select a price and output combination in the elastic range of its demand curve. Of course, the firm could choose a point at which demand is unit price elastic. At that point, total revenue is maximized. But the firm seeks to maximize profit, not total revenue.
Detailed explanation-3: -where marginal revenue equals marginal cost.
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