Question

For a pure monopolist the relationship between total revenue and marginal revenue is such that: A) marginal revenue is positive when total revenue is at a maximum. B) total revenue is positive when marginal revenue is increasing, but total revenue becomes negative when marginal revenue is decreasing. marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing. marginal revenue is positive so long as total revenue is positive. C) Ans: C If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be: A) equal to its price. B) the price at which that unit is sold less the price reductions which apply to all other units of output. the price at which that unit is sold plus the price increases which apply to all other units of output. indeterminate unless marginal cost data are known. D Ans: B When a firm is on the inelastic segment of its demand curve, it can: A) increase total revenue by reducing price. B) decrease total costs by decreasing price. C) increase profits by increasing price. increase total revenue by more than the increase in total cost by increasing price.

please explain the answers step by step and show any curves possible

Answer 1

1) When TR increases, MR is positive because MR=change in TR/change in Q

When TR decreases, MR becomes negative with the decline in TR curve

2) A nondiscriminating monopoly sets MC=MR for profit maximization and MR curve lies below the demand curve

MR

so whe it decides to sell 1 more unit of output, The MR of that unit will be the price at which the unit is sold is less than the price reductions

3) The inelastic demand curve is less than 1 in value which means that a 1% change in price will cause the demand to change by less than 1% so it can just raise the price to increase profits as it will cause the demand to fall by less than the change in price which will increase total revenue

option(C)