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(a)Which of the following is true (A)A monopolist produces on the inelastic portion of its demand. (B)A monopolist always earns an economic profit. (C)The more inelastic the demand the closer marg?
(A) A monopolist produces on the inelastic portion of its demand. This is true because a monopolist maximizes profit where marginal revenue equals marginal cost, and inelastic demand allows the monopolist to raise prices without losing too many customers. However, (B) is not necessarily true, as a monopolist can incur losses in the short run, and (C) is incomplete, but typically, the more inelastic the demand, the closer marginal revenue will be to price.
How does the price elasticity of demand influence the pricing strategies of monopolies?
The price elasticity of demand affects how monopolies set prices. If demand is elastic (responsive to price changes), monopolies may lower prices to increase revenue. If demand is inelastic (not responsive), monopolies can raise prices without losing many customers. Monopolies use this information to maximize profits and maintain their market power.
When demand is a decrease in price total revenue?
When demand decreases, total revenue typically declines as well. This occurs because a decrease in price usually leads to a reduction in the quantity sold, particularly if the product is elastic. However, if the demand is inelastic, total revenue may remain stable or even increase with a price decrease, as the loss in revenue from lower prices can be offset by a smaller drop in quantity sold. Thus, the relationship between price changes and total revenue depends on the elasticity of demand.
If the prices have a little effect on the quantity of a product demanded the product is said to have?
inelastic demand
What is the relation between PED and total revenue?
Price Elasticity of Demand (PED) measures how sensitive the quantity demanded of a good is to a change in its price. When demand is elastic (PED > 1), a decrease in price leads to a proportionally larger increase in quantity demanded, resulting in an increase in total revenue. Conversely, when demand is inelastic (PED < 1), a decrease in price results in a smaller increase in quantity demanded, leading to a decrease in total revenue. If demand is unitary elastic (PED = 1), total revenue remains unchanged when prices change.
(a)Which of the following is true (A)A monopolist produces on the inelastic portion of its demand. (B)A monopolist always earns an economic profit. (C)The more inelastic the demand the closer marg?
(A) A monopolist produces on the inelastic portion of its demand. This is true because a monopolist maximizes profit where marginal revenue equals marginal cost, and inelastic demand allows the monopolist to raise prices without losing too many customers. However, (B) is not necessarily true, as a monopolist can incur losses in the short run, and (C) is incomplete, but typically, the more inelastic the demand, the closer marginal revenue will be to price.
How does the price elasticity of demand influence the pricing strategies of monopolies?
The price elasticity of demand affects how monopolies set prices. If demand is elastic (responsive to price changes), monopolies may lower prices to increase revenue. If demand is inelastic (not responsive), monopolies can raise prices without losing many customers. Monopolies use this information to maximize profits and maintain their market power.
Does a monopoly produce at the inelastic or elastic part of the demand curve?
A monopoly produces at the elastic portion of the demand curve. If producing at the inelastic portion of the deman curve, the monopoly could lower the quantity produced and raise the price to achieve more total revenue.
If the prices have a little effect on the quantity of a product demanded the product is said to have?
inelastic demand
What factors contribute to the pricing of inelastic items in the market?
The pricing of inelastic items in the market is influenced by factors such as limited availability, high demand, and lack of close substitutes. These items do not see significant changes in demand even when their prices increase, allowing sellers to set higher prices.
Why are the unique products price inelastic?
inelastic is supply and demand trends. inelastic means the demand only slightly or never really changes. things like luxury items, sports cars, mansions, penthouse apartments, high class call girls, all of them stay at steady prices because the demand for them never changes.
What is the importance of elasticity of demand and supply?
Elasticity of demand to firms are important because they represent the nature of the goods they are dealing in. For example if a firm produces goods with inelastic demand they will be able to earn high profits because even if they increase the price of the goods, since the change in demand will be less than the change in price. Also if there is a tax they will share less of the burden. This means they can keep prices high and not have to worry about a lot of things. However, if a firm were to produce goods with elastic demand, then they will have to make sure the price of the good remains low and if there is a tax they will be the ones who share the majority of the burden.
What is perfect inelastic demand?
In economic theory, a perfect inelastic demand is a demand for some product that cannot be reduced, either by higher prices or shortages, because it is something that people absolutely have to have at any cost. There would be very few examples of a perfect inelastic demand. Some people need a certain kind of medicine to treat their disease, such as a severe diabetic who needs insulin; this is a perfectly inelastic demand. A heroin addict must have his or her heroin, regardless of cost, so that too is a perfectly inelastic demand. But most products have some elasticity of demand. If you cannot afford fruit juice, you can probably drink water instead.
Why do governments usually tax products with relatively inelastic demands?
Governments typically tax products with relatively inelastic demands because consumers are less sensitive to price changes for these goods, meaning that demand remains stable even as prices rise. This allows governments to generate consistent revenue without significantly reducing consumption. Additionally, inelastic goods often include necessities, making it politically feasible to impose taxes without provoking widespread public backlash. Ultimately, taxing inelastic products maximizes revenue while minimizing the negative economic impact on consumption.
Why doesn't demand equal marginal revenue in a monopoly and how come this discrepancy occurs?
In a monopoly, demand does not equal marginal revenue because the monopoly firm has the power to set prices higher than the marginal revenue. This discrepancy occurs because the monopoly has control over the market and can influence prices to maximize profits, unlike in a competitive market where prices are determined by supply and demand forces.
What is a perfect inelastic demand?
When demand for a product or service does not change at all in response to changes in its price. Of course in the real world that rarely if ever happens; it's an extreme case used to illustrate one endpoint of the spectrum of supply-and-demand responses by consumers.
The difference between a elastic and inelastic demand?
Elastic demand changes according to some other factor. The demand for holdiay trees is elastic throughout the year because there is only damand during the winter season. Inelastic demand is constant. As you might have guessed, the demand for gasoline is inelastic because most families need a constant supply. Even during the so-called summer driving season, the uptick in demand is going to remain the same, unless prices cause what is called "demand destruction." This is what happened during 2009.
