A monopoly producing X at a marginal cost of $10 per unit and charges a price of $20 per unit.Determine the elasticity of demand at the profit-maximizing price of $20.
A)-0.5.
B)-2.
C)-0.333.
D)There is insufficient information to determine the monopoly's price elasticity of demand.

Question

Quizplus · Accepted Answer

The elasticity of demand for a monopoly at the profit-maximizing price is given by the formula: (P-MC)/P = 1/|E|. Substituting the given values: (20-10)/20 = 1/|E|, we find |E| = 2.

A Monopoly Producing X at a Marginal Cost of $10