If Harry Doubleday's price elasticity of demand is -2,and its profit-maximizing price is $6,then its:

Question

Quizplus · Accepted Answer

Since the price elasticity of demand is -2, we know that a 1% increase in price will result in a 2% decrease in quantity demanded. 
To find the profit-maximizing price, we need to set marginal revenue equal to marginal cost. Since the price elasticity of demand is -2, we know that the marginal revenue is half of the price, or $3. 
Therefore, at a price of $6, the marginal cost must also be $3 for profit maximization.

If Harry Doubleday's Price Elasticity of Demand Is -2,and Its