Question

If own price elasticity of demand for your market is -1.2, and your marginal cost is flat at 10, what is the optimal price for your monopoly firm

Answer 1

Answer: $60

Explanation:

The optimal price for a monopoly firm is expressed by;

Price = Marginal Cost * ( Own Price Elasticity/ (1 + Own Price Elasticity))

Price = 10 * ( -1.2 /( 1 - 1.2)

Price = 10 * (-1.2/-0.2)

Price = 10 * 6

Price = $60