If the demand elasticity for the monopolist's product is equal to -2 and marginal revenue is 10,
What is the profit-maximizing price?
A)$20
B)$10
C)$0.50
D)$5

Question

Quizplus · Accepted Answer

The profit-maximizing price can be found using the formula P = MR / (1 + (1/E)), where P is the price, MR is the marginal revenue, and E is the price elasticity of demand. Substituting the given values, P = 10 / (1 + (1/-2)) = 10 / (1 - 0.5) = 10 / 0.5 = $20.

If the Demand Elasticity for the Monopolist's Product Is Equal