A Monopoly Produces X at a Marginal Cost of $10

question 108

Multiple Choice

A monopoly produces X at a marginal cost of $10 per unit and charges a price of $20 per unit.Determine the elasticity of demand at the profit-maximizing price of $20.

• A) −0.5
• B) −2
• C) −0.333
• D) There is insufficient information to determine the monopoly's price elasticity of demand.

---

Definitions:

Government

The governing body of a nation, state, or community which creates and enforces laws, manages public resources, and regulates societal functions.

Government Intervention

Actions taken by a government to affect or interfere with market activities or uphold laws for economic or social outcomes.

Markets Fail

Occurs when a market economy does not efficiently allocate resources, leading to outcomes like monopolies, public goods issues, or externalities.

Efficient Allocation

The distribution of resources in a way that maximizes the net benefits to society or the economy.