If the market demand curve has an elasticity of - 4, then the marginal revenue for a monopolist:
A)is half the price.
B)is not related to the price.
C)is three- quarters of the price.
D)is equal to the price.

Question

Quizplus · Accepted Answer

The marginal revenue (MR) for a monopolist is related to the price elasticity of demand (E) by the formula MR = P(1 + 1/E). With an elasticity of -4, MR = P(1 + 1/-4) = P(1 - 0.25) = 0.75P, which is three-quarters of the price.

If the Market Demand Curve Has an Elasticity of -