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Author Question: Comment on the following statement: Elasticity is constant along a straight-line demand curve. ... (Read 219 times)

leilurhhh

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on: Jun 29, 2018
Comment on the following statement: Elasticity is constant along a straight-line demand curve.
 
  What will be an ideal response?

Question 2

The firm shown in the figure above is
 
  A) a natural monopoly because its LRAC curve slopes downward where it intersects the demand curve.
  B) not a natural monopoly because its LRAC curve slopes downward where it intersects the demand curve.
  C) not a natural monopoly because its MC curve is horizontal.
  D) not a natural monopoly because its MC curve is below its LRAC curve.
Foundations of Microeconomics ¦ Bade, Parkin ¦ 8th Edition
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ilianabrrr

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The statement is false. While the slope is constant along a straight line, the elasticity is not. In fact, at high prices (the upper area of a demand curve) the demand is elastic. As price falls (and quantity demanded increases), the price elasticity of demand gets smaller (in absolute value).

Answer to Question 2

A


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