Problem
1. Explain why marginal revenue must be less than the price when a firm faces a downward-sloping demand curve.
2. A monopolist is maximizing profit. Perhaps due to an innovation in some other product line, he finds that the elasticity of demand for his product is lower. What will this change in the elasticity of demand due to the profit of the monopolist? How will the monopolist respond to this change?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.