A Monopolist Faces a Constant Marginal Cost of $1 Per

question 29

Multiple Choice

A monopolist faces a constant marginal cost of $1 per unit and has no fixed costs.If the price elasticity of demand for this product is constant and equal to -3, then

• A)to maximize profits, he should charge a price of $1.50.
• B)to maximize profits, he should charge a price of $3.
• C)to maximize profits, he should charge a price of $1.33.
• D)he is not maximizing profits.
• E)None of the above.

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Definitions:

Psychological Theory

A framework for understanding human behavior that explores cognitive, emotional, and social influences.

War Theory

A set of ethical guidelines and philosophical arguments about when it is justifiable to start a war (jus ad bellum) and how wars should be conducted (jus in bello).

Monetary Theory

A set of ideas and principles that explain the role of money in the economy, focusing on factors like supply, demand, and inflation.

Business Cycles

The fluctuations in economic activity that an economy experiences over a period of time, characterized by periods of boom and recession.