A monopolist firm faces a demand with constant elasticity of -2.0.  It has a constant marginal cost of $20 per unit and sets a price to maximize profit.  If marginal cost should increase by 25 percent, would the price charged also rise by 25 percent?

Micro Economics For Today
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ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter9: Monopoly
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A monopolist firm faces a demand with constant elasticity of -2.0.  It has a constant marginal cost of $20 per unit and sets a price to maximize profit.  If marginal cost should increase by 25 percent, would the price charged also rise by 25 percent?

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