Final answer:
When demand is inelastic, a monopolist's increase option (1) in price leads to an increase in total revenue, as the loss in units sold is less impactful than the gain from the higher price. If the product has unitary elasticity, the total revenue is maximized, and the price would remain unchanged.
Step-by-step explanation:
If demand is inelastic and a monopolist raises its price, total revenue would increase. This is because when demand is inelastic, the percentage change in quantity demanded due to a price increase is smaller than the percentage change in price. Thus, the higher price more than compensates for the fewer units sold, leading to an increase in total revenue.
When it comes to a monopolistic competitor, if they experience an increase in demand for their product due to a successful advertising campaign, they'll likely increase the price they charge and the quantity they supply. The increased demand can support a higher price, and the firm will want to supply more to maximize profits.
However, if the price elasticity of demand for the product is exactly 1, which is unit elastic, then the monopolistic competitor wouldn't change its price, as total revenue is already maximized.