A singleprice monopolist can produce its output at a constan

A single-price monopolist can produce its output at a constant marginal cost of $4/unit. It faces a linear, downward-sloping demand curve. Which of the following is a possible elasticity of demand value at its profit-maximizing output level? 2

Solution

A single price monopolist can produce its output at a constant marginal cost of $4/unit. If it face linear, downward sloping demand curve. 1 is a possible elasticity of demand value at its profit maximizing output level. So correct option is B. This is because Total revenue reaches its maximum value when the price elasticity of demand is unity.