A monopoly produces a level of output where demand is ______________ (elastic / inelastic / unit elastic).

A monopoly produces a level of output where demand is elastic.

Here's why:

1. Monopolies, by definition, are the only providers of a particular product or service in the market. This gives them the power to set prices and output levels.

2. The demand curve for a monopoly is downward sloping, meaning that as the price increases, the quantity demanded decreases.

3. In the elastic portion of the demand curve, the percentage change in quantity demanded is greater than the percentage change in price. This means that consumers are sensitive to price changes.

4. A monopoly will maximize its total revenue by producing at a level of output where demand is elastic. This is because when demand is elastic, a decrease in price will lead to an increase in total revenue.

5. If a monopoly were to produce in the inelastic portion of the demand curve, a decrease in price would lead to a decrease in total revenue. This is not desirable for the monopoly.

6. Therefore, a monopoly will produce at a level of output where demand is elastic to maximize its total revenue.