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JAMB Economics 2005 Question 1

Question 1

Market Structures

A profit maximizing monopolist should produce within the range where his demand is

  1. A.inelastic
  2. B.elastic
  3. C.infinitely elastic
  4. D.unitarily elastic
Show the answer and explanation

Answer: B (elastic)

Explanation

A monopolist sets MR = MC, and MC is positive, so MR must be positive. MR is positive only where demand is elastic.