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Sagot :
Answer:
2/3P
$30
Explanation:
Here is the complete question
The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -3. The firm’s marginal cost is constant at $20 per unit.
a. Express the firm’s marginal revenue as a function of its price.
b. Determine the profit-maximizing price.
A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.
An example of a monopoly is a utility company
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
If the absolute value of price elasticity is greater than one, it means demand is elastic.
Marginal revenue = price x ([tex]\frac{1 + E}{E}[/tex])
Where e = elasticity
MR = P x [tex]\frac{1-3}{-3}[/tex]
MR = 2/3P
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