It is said that a monopoly will never choose to operate where D is inelastic because MR is negative in elastic portion of the demand curve. How can MR be negative? I can’t visualize the explanation REF: Practice exam for reading 19, Question #4
plot the graph with following values… y-axis price 0-100 x-axis quantity 0 10 (0,100) (1,90) (2,80)…likewise… MR curve is intersecting x-axis at 5… and then try to visualize…you ll see that MR is negative…after passing 5…from upward movement…MR is ll start coming negative…
A: demand is elastic, the monopoly will always have an incentive to charge higher price. C: monopoly is a profit maximizing, so price charged will always be greater then average cost. D: MR= MC is a profit maximizing level, so a equilibrium level of output can occur. B: inelastic portion of demand curve (refer to page 14 FIG 4), there is no incentive for the monopoly firm, also at this point MC>MR. when firm start making losses, the MR can be negative.