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Suppose a Monopolist Faces the Constant Price Elasticity Demand Curve

question 46

Essay

Suppose a monopolist faces the constant price elasticity demand curve:
p = Qε
where ε < 0.The monopolist has a constant marginal cost of c.
a.If ε < -1,can you determine what price and quantity will the monopolist set? Explain.
b.If 0 > ε > -1,what is the price and quantity the monopolist will set?


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