Explain and illustrate using a diagram why a monopolist would never produce in the inelastic range of the demand curve.

Question

Explain and illustrate using a diagram why a monopolist would never produce in the inelastic range of the demand curve. (3 marks for explanation, 3 marks for diagram)

In each of the following cases, state whether the monopolist would increase or decrease output:

Marginal revenue exceeds marginal cost at the output produced; (2 marks)

(ii) Marginal cost exceeds marginal revenue at the output produced. (2 marks)

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