Suppose that a monopolist must choose between two points on its demand curve; it can sell 100 units for $3 each, or it can sell 160 units for $2 each.Which of the following is true?
A)The monopolist is facing an elastic demand.
B)The monopolist is facing unit elastic demand.
C)The monopolist is facing inelastic demand.
D)The monopolist is facing perfectly elastic demand.
E)The elasticity of demand cannot be determined with the information given.

Question

Quizplus · Accepted Answer

The demand is elastic because the total revenue increases when the price decreases from $3 to $2 (from $300 to $320), indicating that the percentage increase in quantity demanded is greater than the percentage decrease in price.

Suppose That a Monopolist Must Choose Between Two Points on Its