If a monopolist's marginal revenue is less than zero over a range of output, then price elasticity of demand must be:
A)greater than one.
B)equal to one.
C)less than one.
D)equal to zero.
E)infinite.

Question

Quizplus · Accepted Answer

If the monopolist's marginal revenue is less than zero, then the monopolist is decreasing its total revenue with every additional unit of output. This means that demand must be relatively elastic, meaning that a small change in price will cause a large change in quantity demanded. Therefore, the price elasticity of demand must be greater than one, indicating that a 1% increase in price will lead to more than a 1% decrease in quantity demanded.

If a Monopolist's Marginal Revenue Is Less Than Zero Over