Consider a monopolist operating on a market with a downward sloping demand curve. The monopolist has a constant marginal cost and no fixed cost. At the current level of production and at the current price level, the price elasticity of demand is equal to -0.8. Assume the monopolist wishes to maximise profits. Would we be able to say anything about whether the monopolist has chosen a price and quantity that maximise profits? Explain your answer by means of diagrams (maximum 150 words) 2. What is the price elasticity of supply in this market?

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