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When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is a. greater than 1. b. equal to 1. c. less than 2. d. equal to 0.
Economics For Today
Solutions
Economics For Today
When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is
- a. greater than 1.
- b. equal to 1.
- c. less than 2.
- d. equal to 0.
The elasticity of demand when the monopolist fasces zero marginal revenue.
Explanation of Solution
The firms produce the goods and services that are demanded by the people in the economy. The production takes place after making use of the factors of production and that means there will be factor costs to the firm while making production. The market structure that is characterized by a single seller in the market who is the price maker and where there are strict entry restrictions into the market is known as the monopoly market.
Option (b):
A monopolist could only maximize his profit as long as the marginal revenue is positive. The marginal revenue of the monopolist is positive when the demand is elastic. When the demand is inelastic, the marginal revenue is negative and when the demand is unitary elastic, the marginal revenue is zero. Thus, option 'b' is correct...
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