2017 (Monopoly, Elasticity) Paper 3 HL

2017 (Monopoly, Elasticity) 

Paper 3 HL

When demand is price inelastic, a decrease in output / increase in price will:

·      Increase total revenue

·      Decrease output and therefore total costs

·      Increase profit

·      The monopolist never wants to produce in the inelastic section of its demand curve as its MR is negative.

·      MC = MR is a condition for profit max

 

The profit-maximizing monopolist would never choose to produce on the inelastic portion of its demand curve, as profit could always be increased by raising price/decreasing output.