Jones is the only producer in a certain market. Why is it unlikely that he will...
Jones is the only producer in a certain market. Why is it unlikely that he will produce an output level in the range where the demand curve for his product is inelastic?
Homework Answers
If he is the only producer in the market then he will try to maximise the profit by producing at the point where the marginal cost and the marginal revenue are equal,
marginal revenue is zero at the point were the demand is unit elastic, if he further reduce the rates then the demand will be inelastic but the marginal revenue will be negative. the cost of producing the goods are not negative and at this point he cannot match marginal cost and marginal revenue in the market and maximise profit, So the output will be at the point were the MR and MC is positive. At that point the demand will always be elastic.
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market—that is, sellers take the market price as given. Sean owns a
restaurant where he sells pizza. The following graph shows Sean's
weekly supply curve, represented by the orange line. Point A
represents a point along his supply curve. The price of pizza is
$3.00 per slice, as shown by the horizontal black line.
From the previous graph, you can tell that Sean...
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