Suppose a monopolist produces a positive level of output. If marginal costs are zero, this output level will occur where price elasticity of demand is exactly -1 unless there are recurring fixed costs.
Answer the following statement true (T) or false (F)
False
Rationale: If a monopolist produces, he produces where MC=MR regardless of recurring fixed costs. (If those recurring fixed costs are too high, he will not produce a positive quantity.) And MR=0 when price elasticity is -1. The statement is thus true except for the last part that starts with "unless".
Economics
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