If a profit maximizing monopolist faces a linear demand curve and has zero marginal cost, it will produce at
A)the lowest point of marginal revenue curve.
B)elasticity of demand equals 1.
C)the lowest point of marginal profit curve.
D)All of the choices are correct.

Question

Quizplus · Accepted Answer

A profit-maximizing monopolist with zero marginal cost will produce where marginal revenue (MR) equals marginal cost (MC), which is zero in this case. For a linear demand curve, this occurs where the elasticity of demand equals 1, which is also the point where MR is at its lowest before becoming negative. Therefore, all the choices are correct as they describe the same point on the demand curve.

If a Profit Maximizing Monopolist Faces a Linear Demand Curve