Final answer:
A price making monopolist will maximize total revenue by operating at the unit elastic point of their demand curve, where total revenue is maximized, and marginal revenue equals marginal cost.
Step-by-step explanation:
Recognizing how demand elasticity affects total revenue, a price making monopolist will aim to operate where demand is unit elastic, at the midpoint of the demand curve, to maximize total revenue. The monopolist will avoid price changes in the inelastic range of demand since this would decrease total revenue. Unlike perfectly competitive firms, which face a perfectly elastic demand, and monopolistic competitors, which have some degree of competition and thus face a more elastic demand curve, the monopolist's demand curve is the market demand curve and is generally downward sloping.
The monopolist's goal is to find the point where total revenue is maximized, and this occurs when marginal revenue equals marginal cost. At this point, the firm will determine the price by the corresponding point on the demand curve. In practice, this means that if the monopolist identifies the current price level as being in the elastic range of the demand curve, they may lower the price to increase total revenue, conversely, if the price is in the inelastic range, they should raise the price to increase total revenue.