Explain why a momopolist would never produce in the inelastic range of the demand curve

Expert Solution

A monopolist will neve be in equilibrium at a point on demand curve (AR curve) where the demand is inelastic (e<1). That is , when When the elasticity of demand or average revenue is less than 1 , marginal revenue will be negative and total revenue will be falling . Hence, a sensible monopolist will never produce at that portion of demand curve where elasticity of demand is less than 1( lower portion of demand curve ).

This is shown in the following diagram-

it is very clear from the above TR , MR and AR (demand curve) that, at the inelastic(lower) portion of demand curve TC will be falling and MR will be negative. Hence, no monopolist will produce at that portion of demand curve where elasticity of demand is less than one.

Rahul Sunny answered 2 years ago

Why is it that a profit-maximizing businessman would always raise prices when facing an inelastic demand curve, but might or might not raise prices when facing an elastic demand curve?

Why is it that a profit-maximizing businessman would always raise prices when facing an inelastic demand curve, but might or might not raise prices when facing an elastic demand curve? Explain and justify your answers in detail by covering the inelastic and elastic demand curves. Make sure you define the meaning of the elastic and inelastic demands.

Why does a toothbrush have an inelastic demand and an automobile have an elastic demand? Explain...

Why does a toothbrush have an inelastic demand and an automobile have an elastic demand? Explain the underlying economic intuition.

1. Is the demand curve for the M&M chocolate ELASTIC or INELASTIC? Why? 2. Name 6...

1. Is the demand curve for the M&M chocolate ELASTIC or INELASTIC? Why? 2. Name 6 forces or factors that determine whether a demand curve is ELASTIC or INELASTIC, and please apply each of these 6 factors to the demand curve for the M&M chocolate.

4a) i. Explain why the monopolist will not operate on the inelastic portion of the demand...

4a) i. Explain why the monopolist will not operate on the inelastic portion of the demand curve. ii. Derive the slope of the Monopolist marginal revenue cure. 4b) i, Illustrate why and how a government may intervene in the monopoly structure. ii. Discuss why and how a monopolist practices price discrimination.

Explain why demand curve are downward sloping

Which of the following statements is (are) correct? (x) If the demand curve is perfectly inelastic,...

Which of the following statements is (are) correct? (x) If the demand curve is perfectly inelastic, then buyers bear the entire burden of the tax and the price kept by the seller after the tax is imposed is the same amount as they kept before the tax was imposed (y) If the supply curve is perfectly inelastic, then sellers bear the entire burden of the tax and the price paid by buyers is the same after the tax is imposed...

Consider a market with a perfectly elastic demand curve at p∗= 1,763 and a perfectly inelastic...

Consider a market with a perfectly elastic demand curve at p∗= 1,763 and a perfectly inelastic supply curve at q∗= 452. What is the Consumer Surplus? What is the Producer Surplus?

1. The demand curve faced by a monopolistic seller a. is perfectly inelastic, whereas that facing...

1. The demand curve faced by a monopolistic seller a. is perfectly inelastic, whereas that facing the purely competitive firm is perfectly elastic. b. is downward sloping, whereas that facing the purely competitive firm is perfectly elastic. c. is perfectly elastic, whereas that facing the purely competitive firm is perfectly inelastic. d. is downward sloping, whereas that facing the purely competitive firm is perfectly inelastic. 2. The demand curve facing a a. purely competitive firm is downsloping because the purely...

• Is the demand curve for your product relatively elastic, inelastic, or unitary elastic? Demonstrate for...

• Is the demand curve for your product relatively elastic, inelastic, or unitary elastic? Demonstrate for your company's product, by how much the quantity demanded will change if you pass on a 10% increase in cost. In other words, show your calculation of the percentage change in the quantity demanded given a 10% change in your price. You must provide calculations showing the percentage change in quantity demanded. • Given your company's and the price elasticity of demand and the...

1. Explain why the Aggregate Demand curve is downward sloping?

Question