A Monopoly Produces Widgets at a Marginal Cost of $10

question 96

Multiple Choice

A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs. It faces an inverse demand function given by P = 50 - Q. The demand elasticity of a widget at the monopoly price and quantity is:

• A) -1.5.
• B) -2.
• C) -2.5.
• D)2.