For a monopoly firm to maximize profits,its price markup should:
A)be at its maximum possible point.
B)equal the price elasticity of demand.
C)equal the inverse of demand elasticity.
D)equal marginal revenue.

Question

Quizplus · Accepted Answer

The price markup for a monopoly firm to maximize profits should equal the inverse of the demand elasticity. This is because the optimal markup formula is based on the price elasticity of demand, where the markup over marginal cost is inversely related to the elasticity of demand.

For a Monopoly Firm to Maximize Profits,its Price Markup Should