The more elastic the demand curve, a monopoly will
A)have a larger Lerner Index.
B)face a lower marginal cost.
C)earn more profit.
D)lose more sales as it raises its price.

Question

Quizplus · Accepted Answer

A more elastic demand curve means that consumers are more sensitive to changes in price, so a monopoly will have to lower its price in order to maintain its sales. As a result, if the monopoly raises its price, it will lose more sales, which will decrease its revenue and profit. Therefore, D is the correct answer.

The More Elastic the Demand Curve, a Monopoly Will