If the marginal cost of producing vanity license plates is virtually zero (by prison inmates with little else to do), then states would maximize their profits on plate sales at the point on a linear demand curve where
A)demand is inelastic.
B)demand is elastic.
C)demand is unit elastic.
D)the demand curve crosses the horizontal axis.

Question

Quizplus · Accepted Answer

When the marginal cost of producing an item is virtually zero, maximizing profit occurs where the price elasticity of demand is unit elastic. This is because at unit elasticity, the revenue from selling an additional unit is maximized, balancing additional revenue with volume.

If the Marginal Cost of Producing Vanity License Plates Is