if there are no fixed costs and marginal cost is constant at $44, the price elasticity of demand at the profit-maximizing level of output is closest to
A)20.39.
B)25.14.
C)22.57.
D)210.29.
E)20.19.

Question

Quizplus · Accepted Answer

At profit-maximizing level of output, MC=MR. Since marginal cost is constant at $44, MR=$44. We know that price elasticity of demand (PED) can be calculated using the formula PED = (% change in quantity demanded) / (% change in price). Since we are looking for the profit-maximizing level of output, we can assume that the price is set such that the demand is elastic, which means that PED > 1.

To maximize profit, we need to find the quantity at which MR = MC, and then set price such that the demand is elastic. At this level of output, the price elastic can be calculated as PED = (44/Q) * (P/44), where Q is the quantity, and P is the price. Since we know that MR=$44, we can substitute it in the above equation as follows:

PED = 1 / (1 - (1/Q))

To maximize profit, we need to find the level of output at which PED is equal to 1. Solving the above equation, we get Q = 22.57.

Therefore, the price elasticity of demand at the profit-maximizing level of output is closest to C) 22.57.

If There Are No Fixed Costs and Marginal Cost Is