if there are no fixed costs and marginal cost is constant at $48, the price elasticity of demand at the profit-maximizing level of output is closest to
A)-5.69.
B)-0.35.
C)-11.38.
D)-2.85.
E)-0.18.

Question

Quizplus · Accepted Answer

In a scenario where there are no fixed costs and the marginal cost is constant, the profit-maximizing condition occurs where marginal cost (MC) equals marginal revenue (MR). Given that the marginal cost is constant at $48, this implies that the firm is operating in a perfectly competitive market, where price equals marginal cost (P = MC). In such markets, the demand curve faced by the firm is perfectly elastic, implying an infinite price elasticity of demand. However, none of the provided options suggest an infinite elasticity. The closest approximation given the context and the nature of the question might involve applying the formula for price elasticity of demand or considering theoretical implications. Since the question seems to involve a calculation error or misunderstanding (as none of the options directly correspond to the theoretical infinite elasticity of demand in perfect competition), option D is chosen as the closest match based on the context provided, although it does not accurately reflect the theoretical elasticity in such market conditions. This answer is based on standard economic theory and the information provided in the question.

If There Are No Fixed Costs and Marginal Cost Is