Question

The pure (profit maximizing) monopolist's demand curve is not?

1) perfectly elastic, because the firm will still have some competitors even if they are not close.
2) perfectly inelastic, because MR < MC when demand is inelastic, so the price would be falling.
3) perfectly inelastic, because MR is negative when demand is inelastic, so MR = MC < 0.
4) downward sloping, because MR is negative when demand is elastic, so MR = MC < 0.

Answer 1

The demand curve for a monopolist is downward sloping and less elastic compared to a monopolistic competitor, as monopolists face no close substitutes. A monopolist maximizes profits at the point where marginal revenue equals marginal cost.

Step-by-step explanation:

The pure (profit maximizing) monopolist's demand curve is complex due to the unique position a monopoly has in the market. The demand curve of a monopolist is downward sloping, which means it has the ability to raise prices without losing all its customers or lower them to gain more, as there are no close substitutes for its product. This differs significantly from a monopolistic competitor, whose demand curve is more elastic because there are similar products available from other firms. When the monopolistic competitor raises its price, it will lose more customers than a monopoly but fewer than a perfect competitor would. The monopolist operates where MR=MC, which is not necessarily at the point where demand is perfectly elastic or perfectly inelastic.