Suppose the price elasticity of demand at the profit maximizing output for a monopolist is - 3. If the monopolist's marginal cost is $6 per unit, what is the profit maximizing price?
A)12
B)9
C)3
D)6

Question

Quizplus · Accepted Answer

The profit-maximizing condition for a monopoly is MR=MC. The marginal revenue for a monopolist is given by:
MR = P(1 + 1/|E|), where P is the price and E is the price elasticity of demand.
Therefore, we have:
P(1 + 1/|E|) = MC
P(1 + 1/3) = 6
P = 9
Hence, the profit maximizing price is $9.

Suppose the Price Elasticity of Demand at the Profit Maximizing