Question

A pure monopolist should never produce in the _________.a. elastic segment of its demand curve because it can increase total revenue and reduce total cost by lowering price. b. inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price. c. inelastic segment of its demand curve because it can always increase total revenue by more than it increases total cost by reducing price. d. segment of its demand curve where the price elasticity coefficient is greater than one.

Answer 1

Answer: The correct answer is "b. inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

Explanation: A pure monopolist should never produce in the inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

It would be uneconomical for a pure monopolist to produce in the inelastic segment of its demand curve because it would not be increasing its profits, because if it increases the price it can reduce the total cost and increase total revenues.