A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs. It faces an inverse demand function given by P = 50 - Q. The demand elasticity of a widget at the monopoly price and quantity is:
A) -1.5.
B) -2.
C) -2.5.
D)2.

Question

Quizplus · Accepted Answer

The demand elasticity of a widget at the monopoly price and quantity is -1.5. This is because the inverse demand function is P = 50 - Q, which means that the demand elasticity is -1.5.

A Monopoly Produces Widgets at a Marginal Cost of $10