If e_P = -3 and MC = $0.66, the profit-maximizing price is:

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The profit-maximizing price is one where marginal revenue equals marginal cost (MR = MC). We know that e_P, which represents the elasticity of demand, is equal to -3. Since the demand is elastic (e > -1), the firm should set a price lower than the one that would maximize revenue. Therefore, the price should be set lower than $0.66, which is the price at which the revenue is maximized. We can use the following formula to calculate the profit-maximizing price: Price = (MC / (1 + (1 / |e|))) Price = ($0.66 / (1 + (1 / 3))) Price = $0.498 However, the firm cannot price the product lower than its average variable cost (AVC) if it wants to remain in business in the long run. Let's assume that AVC is $0.50. Therefore, the firm should set the price at a level that covers both MC and AVC. The closest option to this level is $0.99, which is slightly higher than the calculated price of $0.498.

If EP = -3 and MC = $0

If E_P = -3 and MC = $0