Answer to Question #160783 in Microeconomics for majd mushasha

Question

marginal cost is 20 and the price elasticity of demand is -2.0 determine profit maximizing price

Answer 1

$Price=MC\times[e/(1+e)]$

$where,MC=\$20, e=-2.0$

so price $=\$20\times[(-2.0)/(1+(-2.0))]=20\times[(-2.0)/(-1)]=20\times2=\$40$

So the profit maximizing price $=\$40$