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Demand elasticity and marginal revenue

16 December, 2015 - 15:24

We have shown above that the MR curve cuts the horizontal axis at a quantity where the elasticity of demand is unity. We know from Chapter 4 that demand is elastic at points on the demand curve above this unit-elastic point. Furthermore, since the intersection of MR and MC must be at a positive dollar value (MC cannot be negative), then it must be the case that the profit maximizing price for a monopolist always lies on the elastic segment of the demand curve.