Question

SOLVED

Answer 1

A) is greater than the quantity that maximizes profit.

Explanation:
We know that monopolist operates in the elastic region of the demand curve. Elastic region of the demand curve is the upper portion of the demand curve, that is, the part that lies to the left of the mid point on the demand curve. The mid point of the demand curve corresponds with Marginal Revenue (MR) = 0 and profit maximization output for a monopolist is that where MR equals marginal cost so it occurs in the elastic region of the demand curve. We also know that when demand is elastic then total revenue increases as price decreases. So, as quantity increases beyond profit maximizing quantity and thereby price decreases, total revenue will increase until demand is elastic or we can say that until MR does not become negative. So, revenue maximizing quantity is greater than profit maximizing quantity.