The following table shows the units of output sold at different price levels by Gizmo's Inc.Table 11.1

-For a monopolist with a linear demand curve, total revenue is maximum when:
A)marginal revenue is positive.
B)marginal revenue is at its maximum.
C)the price elasticity of demand is greater than unity.
D)the price elasticity of demand is equal to unity.
E)marginal revenue is at its minimum.

Question

The following table shows the units of output sold at different price levels by Gizmo's Inc.Table 11.1
 
-For a monopolist with a linear demand curve, total revenue is maximum when:
A)marginal revenue is positive. 
B)marginal revenue is at its maximum. 
C)the price elasticity of demand is greater than unity. 
D)the price elasticity of demand is equal to unity. 
E)marginal revenue is at its minimum.

Quizplus · Accepted Answer

Total revenue for a monopolist is maximized when the price elasticity of demand is equal to unity, meaning that the percentage change in quantity demanded is equal to the percentage change in price. This is because at this point, any change in price does not lead to a proportionate change in total revenue.

The Following Table Shows the Units of Output Sold at Different