Final answer:
A monopolist can increase the price and maintain the level of output in the inelastic segment of its demand curve, leading to higher profits.
Step-by-step explanation:
A monopolist can determine its profit-maximizing price and quantity by analyzing the marginal revenue and marginal costs of producing an extra unit. If the marginal revenue exceeds the marginal cost, then the firm should produce the extra unit.
In the inelastic segment of its demand curve, the monopolist is producing and selling a level of output where the demand is relatively inelastic. This means that a change in price will result in a smaller change in quantity demanded. In this scenario, the monopolist can increase the price without a significant decrease in quantity demanded, leading to higher profits.
For example, if a monopolist is producing and selling a medicine that has a limited number of substitutes and is necessary for a specific medical condition, the demand for the medicine would likely be inelastic. The monopolist can increase the price of the medicine without losing many customers because there are few alternatives available for the consumers.