Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 15 - Part V - Monopoly - Problems and Applications - Page 325: 7

Answer

a) Total revenue and total costs decrease. b) Please see the graph. c) Please see the graph.

Work Step by Step

a) A monopolist would not produce where the demand curve is inelastic since the price increase would be offset by a quantity decrease. The percentage decrease in the quantity would be greater than the percentage increase in price. b) The part of the demand curve that is inelastic is highlighted in green. This part of the demand curve ends at the same quantity such that the marginal revenue at the quantity is zero. c) The quantity and price that maximize total revenue are, respectively, $Q_{0}$ and $P_{0}$. At $Q_{0}$, the marginal revenue is zero.
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