Suppose the firm is a monopolist. It faces a downward-sloping
demand curve, P(Q). If it also has non-negative marginal cost, will
it choose a quantity on the demand curve where the price elasticity
of demand is less than, greater than, or equal to -1? Explain.
Two Hints: First, recall that R(Q) = P(Q) times Q, and that the
price elasticity of demand is defined as .
Second, recall the condition MR = MC. Think about how the firm’s
revenue will...