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Calculating the optimal price in the given case

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The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -2. The firm's marginal cost is constant at $15 per unit.

a. Express the firm's marginal revenue as a function of its price.

MR = x P

b. Determine the profit-maximizing price.

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Solution Summary

Solution determines the Marginal Revenue function and profit maximizing price in the given case.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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