Which of the following statements is true regarding a simple pricing rule for monopoly and monopolistic competition? A)P[E_F / (1 + E_F)] = MC. B)P = [(1 + E_F) / E_F]MC. C)P[(1 + E_F) / E_F] = MC. D)all of the statements associated with this question are correct.

Question

Quizplus · Accepted Answer

The correct formula for a simple pricing rule for monopoly and monopolistic competition is P[(1 + E_F) / E_F] = MC. This formula takes into account the elasticity of demand (ES), the percentage markup over marginal cost (FS), and the share of fixed costs in total costs (U1B1) and allows the firm to set a profit-maximizing price. Choice A is incorrect because it includes the denominator of (1 + E_F), which would result in a higher price. Choice B is incorrect because it swaps the positions of the numerator and denominator of the correct formula. Choice D is incorrect because only one statement is correct.

Which of the Following Statements Is True Regarding a Simple