A monopolist faces a demand with constant elasticity of -3. It has a constant marginal cost of $40 per unit and set a price to maximize profit. If marginal cost should increase by 35%, would the price change also rise by 35%?
A monopolist faces a demand with constant elasticity of -3. It has a constant marginal cost of $40 per unit and set a price to maximize profit. If marginal cost should increase by 35%, would the price change also rise by 35%?
Chapter13: Monopoly And Antitrust
Section: Chapter Questions
Problem 5P
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A monopolist faces a demand with constant elasticity of -3. It has a constant marginal cost of $40 per unit and set a price to maximize profit.
If marginal cost should increase by 35%, would the price change also rise by 35%?
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