Question

How does price elasticity affect the price-quantity combination and segment of the demand curve that the monopolist would prefer for price and output?

Answer 1

In the inelastic part of the demand curve, the profit-maximizing monopolist will prevent price-quantity combinations and prefer a mixture of price-quantity in the elastic part. Marginal revenue is negative in the inelastic range of the demand curve. A fall in price will lead in a decrease in total revenue in this range. It will also boost overall expenses, thereby reducing earnings. In the case of the elastic portion of the demand curve, the opposite results pure monopolist determines that the marginal cost of production is $2.00 at the current output level, the average variable cost is $2.75, and the average total cost is $2.95. The marginal income is 2.75 dollars