In Problem 6, if there are no fixed costs and marginal cost is constant at $8, the price elasticity of demand at the profit-maximizing level of output is closest to
A) -1.17.
B) -4.70.
C) -0.85.
D) -2.35.
E) -0.43.

Question

Quizplus · Accepted Answer

At the profit-maximizing level of output, the price elasticity of demand is equal to -1 when marginal cost is constant and there are no fixed costs. However, since none of the options is exactly -1, the closest value is -1.17.

In Problem 6, If There Are No Fixed Costs and Marginal