5 Consider the relationship between monopoly pricing and price elasticity of demand.

a Explain why a monopolist will never produce a quantity at which the demand curve is inelastic. (Hint: If demand is inelastic and the firm raises its price, what happens to total revenue and total costs?)

b Draw a diagram for a monopolist, precisely labelling the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal-revenue curve.)

c On your diagram, show the quantity and price that maximise total revenue.