if there are no fixed costs and marginal cost is constant at $8, the price elasticity of demand at the profit-maximizing level of output is closest to
A)-1.17.
B)-4.70.
C)-0.85.
D)-2.35.
E)-0.43.

Question

Quizplus · Accepted Answer

The correct answer is A because the price elasticity of demand at the profit-maximizing level of output is equal to the negative of the inverse of the marginal cost. In this case, the marginal cost is constant at $8, so the price elasticity of demand is equal to -1/8 = -0.125.

If There Are No Fixed Costs and Marginal Cost Is