Question

What is the type of demand curve of Monopoly?

• A. Inelastic
• B. Elastic
• C. Perfectly elastic
• D. Perfectly inelastic

Hint:

In a monopoly, the firm faces a downward sloping demand curve, and in the upper portion, the demand is elastic, meaning a price decrease leads to a significant increase in quantity demanded.

Answer 1

The Correct Option is B

Step 1: Understanding the Demand Curve for Monopoly:
A monopoly is a market structure where a single firm dominates the supply of a product or service, with no close substitutes available. The demand curve faced by a monopolist is typically downward sloping, meaning that as the price decreases, the quantity demanded increases. Step 2: Characteristics of the Monopoly Demand Curve:
- A monopoly typically has an elastic demand curve in the upper portion. This means that a reduction in price will lead to a proportionally larger increase in quantity demanded, resulting in higher total revenue.
- As the monopolist lowers the price, the firm experiences more significant changes in demand at higher price levels, leading to greater elasticity.
Step 3: Conclusion:
Thus, the demand curve for a monopoly is typically elastic, especially in the upper portion of the curve where the monopolist can influence demand by changing prices.