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29 May, 20:05

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.

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  1. 29 May, 20:25
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    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.
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