CA Foundation P4 · Chapter 4 · Question 7 of 15
Which statement about a profit-maximising monopolist is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) It never produces on the inelastic portion of its demand curve when marginal cost is positive
Explanation
Profit maximisation requires MR = MC. With MC > 0, MR must be positive, and MR is positive only where elasticity exceeds one, so output lies on the elastic part of demand. A monopolist can incur short-run losses, and it has no unique supply curve because price and quantity are determined jointly with demand.
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