Question

89. If a monopolist were to produce in the inelastic segment of its demand curve A. total revenue would be at a maximum. B. marginal revenue would be negative. C. the firm would be maximizing profits. D. it would necessarily incur a loss. 91. Assume a monopolist is charging price and selling output Q as shown on the diagram. On the basis of this information we can say that: Dollars MR 0 Quantity A. if marginal costs were somehow zero, the firm would be maximizing its total revenue. B. if marginal costs were positive the firm would increase profits by reducing price and selling more output C. the firm is producing where the price elasticity coefficient is less than one. D. the firm is a "price taker."

please explain the answers

Answer 1

89. The correct answer is B. Marginal revenue would be negative.

Because Inelastic segment of its demand curve means Percentage of price decreases is greater than percentage of quantity increase, it causes TR(total revenue) to fall. And we know Marginal revenue(MR) is the additional revenue generated from additional unit of output. So MRn = TRn - TRn-1. Or in other words we can say that MR is the change in TR from sale of one more unit. So monopolist would never want to produce where marginal revenue is negative.

91. The Correct answer is B. if marginal costs were posititve the firm would increase profits by reducing price and selling more output. Because the graph show unitary elastic demand. Which Percentage decrease in prices is equal to percentage increase in quantity.

54. The correct answer is D. is positive.

Because When monopolistic demand curve is elastic, It means percentage decrease in price is less than percentage increase in quantity. It causes TR rise. So when TR rises the MR also positive.