A monopoly producing X at a marginal cost of $80 per unit and charges a price of $100 per unit.Determine the elasticity of demand at the profit-maximizing price of $100.

Question

Quizplus · Accepted Answer

The elasticity of demand at the profit-maximizing price for a monopoly is given by the formula: (P - MC) / P * (1 / E) = 1, where P is price, MC is marginal cost, and E is elasticity. Solving for E: (100 - 80) / 100 * (1 / E) = 1, gives E = -5.

A Monopoly Producing X at a Marginal Cost of $80