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A monopolist’s demand curve is MWTP=50-Q. They produce 30 units. What is the price elasticity at this output? What should the firm do to maximize profit if marginal cost is greater than 0?

Answer

Small Tutor Aaron Lee

MWTP=50-30=$20 price elasticity = [P/Q][1/SLOPE OF P] = [$20/30 UNITS][1/1]=0.666...