If elasticity of demand is -2,marginal cost is $4,and average cost is $6,a profit-maximizing markup price is:

Question

Quizplus · Accepted Answer

The profit-maximizing markup price can be calculated using the formula:

Markup Price = Marginal Cost / (1 - 1/Elasticity of Demand)

Using the given values, we can substitute and solve for Markup Price:

Markup Price = 4 / (1 - 1/-2) = 4 / (1 + 0.5) = 4 / 1.5 = $8

Therefore, the best choice is C) $8 because it is the profit-maximizing markup price.

If Elasticity of Demand Is -2,marginal Cost Is $4,and Average