In 1999, a judge declared that Microsoft was a monopolist.Assuming that it was maximizing its profits at its chosen level of output, we may conclude that the absolute value of the price elasticity of demand for its systems was:
A) less than 1.
B) equal to 1.
C) greater than 1.
D) There is insufficient information upon which to make a determination.

Question

Quizplus · Accepted Answer

When a firm is maximizing profits and is a monopolist, the price elasticity of demand for its product is greater than 1 (elastic), because a monopolist will set prices where marginal revenue equals marginal cost, and this occurs when demand is elastic.

In 1999, a Judge Declared That Microsoft Was a Monopolist