contestada

The manager of a local monopoly eslimales that lhe elasticily of demand for its product is constanl and equal to -3. Thefmn’s marginal cost is conslam at $20 per unita. Express the firm‘s marginal revenue as a function of its price.b. Determine lhe prom-maximizing price.

Respuesta :

Karabo99

Answer:

a.  MR = 2/3P

b. The prom-maximizing price is $30.

Explanation:

a.  MR = P(1 + 1/e)

          = P(1 - 1/3)

          = 2/3P

Therefore, Thefirm‘s marginal revenue as a function of its price is    MR = 2/3P

b. monopoly firm maximizes profit when MR = MC

2/3P = 20

P = $30

Therefore, The prom-maximizing price is $30.

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