The manager of a local monopoly eslimales that lhe elasticily of demand for its product is constanl and equal to - 3. Thefmn's marginal cost is conslam at $20 per unita. Express the firm's marginal revenue as a function of its price. b. Determine lhe prom-maximizing price.

a. MR = 2/3P

b. The prom-maximizing price is $30.

Explanation:

a. MR = P (1 + 1/e)

= P (1 - 1/3)

= 2/3P

Therefore, Thefirm's marginal revenue as a function of its price is MR = 2/3P

b. monopoly firm maximizes profit when MR = MC

2/3P = 20

P = $30

Therefore, The prom-maximizing price is $30.