Suppose that there are no variable costs Think about what th

Suppose that there are no variable costs. Think about what this means. Marginal cost is the additional cost of producing one more unit of a good.

Why will all monopolists facing positive marginal cost produce where demand is elastic ?

Solution

Ans

1 It means there is no variable cost at alll

2 Because inelastic Demand will decrease revenue as price is reduced. Facing positive marginal cost then means monopolistic will not produce where demand is inelastic