Question

True or Fasle and explain why Monopolies usually produce products that have relatively elastic demand

Answer 1

True

The monopoly maximizes profit at MR=MC because A monopoly has the market power to change the price.

The profit is maximum at MR=MC because when profit is maximum the marginal profit is zero, the marginal profit =marginal revenue -marginal cost where marginal revenue curve is downward sloping and marginal cost curve is upward sloping.

The demand is unit elastic when the MR=0 and elastic when MR>0, inelastic when MR<0

as we know the MR=MC is the profit-maximizing production level, MC cannot be negative which means the firm should produce where MR>0 which means the firm produces in the area of elastic demand.