Question: Portion from notes: MR = P(1+(1/E)) Well, for starters, suppose that E = -1 - in this case MR = 0 and TR is maximized!

Portion from notes:

MR = P(1+(1/E))

Well, for starters, suppose that E = -1 - in this case MR = 0 and TR is maximized! Suppose that E = - .5 (we are producing on the inelastic portion of demand), then MR = -P which means our last unit produced yielded negative MR - we obviously are NOT maximizing profits.So, to maximize profits you MUST be producing on the elastic portion of demand!

Evaluate this statement: "If I am producing on the elastic portion of demand, then I know that I am maximizing profits because I am producing where MR = MC."

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