Download Elastic and Inelastic Range and Total Revenue

The GenericDiagramof a Monopolyand Its Profits
The marginal cost (MC) curve cuts through the average total
cost (ATC) curve at the lowest point on the average total cost
curve. Second, the marginal revenue (MR) curve is below the
demand curve over the entire range of production. Where MR
is "O" is the divider between the elastic range and inelastic
range of demand.
A Monopoly (showing profit)
Price
Marginal
cost (MC) / S
Average
tota l cost
(ATC)
Total
revenue
(TR)
Total
costs
(TC)
emand (D) /
Margina l
reven u e (MR)
Quantity
p'duc
ed
marginal benefit (MB)
\ MR
=TR
0
and
is maximized
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Quantit y
The GenericDiagramof a Monopolyand Its Profits(cont.)
In the elastic range (> 1), consumers are sensitive to increases
in prices and will pay less of the increase the more the price
increases. In the inelastic range (<1), just the opposite.
A Monopoly (showing profit)
Price
Margina l cost (MC) I S
Average
tota l cost
(ATC)
Total
re v enue
(TR)
Total
costs
(TC)
emand
marginal
Marginal
reven u e (MR)
(D) /
benefit
---.:- --a.
Quantity
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/'
produc ed
\
MR = O
and TR
is max imized
Quantity
(MB)
The Generic Diagram of a Monopolyand Its Profits(cont.)
A Monopoly(showingprofit)
Price
Marginal cost (MC) / S
Average
total cost
(ATC)
Total
revenue
(TR)
Total
costs
(TC)
.
~
Q uantity produced
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Demand (D) /
marginal benefit (MB)
Marginal
revenue (MR)
\
MR=O
and TR
is maximized
Quantity
The GenericDiagramof a Monopolyand Its Profits1.s.
Dernand
QUA TITY OF A TOMOBILES
32. In the figure above, at ,vhich of the given points is
den1and rnost elastic?
(A)
(B )
(C)
(D)
(E)
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X
y
Z
TI1e elasticityis the san1efor all points.
The relative elasticity cannot be detennined
,vith the given infonnatioo.
The GenericDiagramof a Monopolyand Its Profits1.s.
Dernand
QUA TITY OF A TOMOBILES
32. In the figure above, at ,vhich of the given points is
den1and rnost elastic?
(A) X
(B ) y
<e
z
(D) TI1e elasticityis the san1efor all points.
(E) The relative elasticity cannot be detennined
,vith the given infonnatioo.
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The GenericDiagramof a Monopolyand Its Profits1.s.
9. A single-price monopolist is currently producing in
the inelastic portion of its market demand curve. In
order to maximize profits, the monopolist should
change the price and output in which of the
following ways?
(A)
(B)
(C)
(D)
(E)
Price
Output
Increase
Increa e
Increa se
Decrease
Not change
Increase
Decrea e
Not change
Increase
Increase
19. If the detnand for insulin is price inelastic, a
5 percent increase in the price of in ulin ,vill
(A) have no effect on the total revenue of insulin
producers
(B) increase the total revenue of insulin
producers
(C) decrea e the total revenue of insulin
producers
(D) decrease the total spending on insulin by
coo un1er
(E) cause the detnand for insulin to be less elastic
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The GenericDiagramof a Monopolyand Its Profits1.s.
9. A single-price monopolist is currently producin g in
the inelastic portion of its market demand curve. In
order to maximize profits , the monopoli st should
change the price and output in which of the
following ways?
(A)
((C)
(D)
(E)
Pric e
Output
Increase
Increa e
Incr ease
Decr ease
Not change
Incr ease
Decrea e
Not change
Incr ease
Incre ase
19. If the detnand for insulin is price inelastic, a
5 percent increase in the price of in ulin ,vill
(A) have no effect on the total revenue of insulin
producers
increase the total revenue of insulin
producers
(C) decrea e the total revenue of insulin
producers
(D) decrease the total spending on insulin by
coo un1er
(E) cause the detnand for insulin to be less elastic
e)
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