Economics question help?
A monopolist has determined that at the current level of output the price elasticity of demand is -0.15. Which of the following statements is true?
A: The firm should reduce output
B: This is typical for a monopolist; output should be left unchanged.
C: The firm should increase output
D: It is impossible to say what the firm should do unless we have more information.
- OiyLv 62 months ago
A should be the right answer. A reduction in output will jack up price and income even more if the demand is inelastic.