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(Solved): 7 . Monopoly and Price ElasticityConsider the relationship between monopoly pricing and the price el ...
7 . Monopoly and Price Elasticity
Consider the relationship between monopoly pricing and the price elasticity of demand.
If demand is inelastic and a monopolist raises its price, total revenue would and total cost would . Therefore, a monopolist will produce a quantity at which the demand curve is inelastic.
Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the margina/revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR).