Why would a monopolist never set a price on a point in the inelastic portion of the demand curve?
A) Marginal revenue would be negative and therefore well below the marginal cost curve.
B) The point where marginal revenue equals marginal cost would be below the shutdown point.
C) The demand curve would be below the average total cost curve.
D) The monopolist would be operating at a loss.

Question

Quizplus · Accepted Answer

In the inelastic portion of the demand curve, each additional unit sold decreases total revenue because the percentage decrease in price is greater than the percentage increase in quantity demanded. This results in a negative marginal revenue, which would not be chosen by a profit-maximizing monopolist since it would not cover the marginal cost of production.

Why Would a Monopolist Never Set a Price on a Point