Suppose a Monopolist Knows the Own Price Elasticity of Demand

question 140

Multiple Choice

Suppose a monopolist knows the own price elasticity of demand for its product is −3 and that its marginal cost of production is constant MC(Q) = 10.To maximize its profit,the monopoly price is:

• A) $1.50 per unit.
• B) $6.67 per unit
• C) $10 per unit.
• D) $15 per unit.

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Definitions:

Salvage Value

The assessed salvage value of an asset at the close of its lifespan.

Pretax Return

The income earned by a company before taxes are deducted.

Internal Rate Of Return

The discount rate at which the net present value of an investment project is zero; the rate of return of a project over its useful life.

Cash Inflow

The total amount of money being received by a company, often from its main activities such as sales of goods or services.