Question
1.Suppose a firm has a constant marginal cost of $12. The current price of the product is $28. It is estimated that the price elasticity
1.Suppose a firm has a constant marginal cost of $12. The current price of the product is $28. It is estimated that the price elasticity of demand is -4.0.
a.Is the firm charging the optimal price for the product? Demonstrate how you know.
The marginal cost is $12 and the elasticity of demand is -4.
b.Should the firm change the price? If so, how?
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Econometric Analysis Of Cross Section And Panel Data
Authors: Jeffrey M Wooldridge, J M Wooldridge
2nd Edition
0262232588, 9780262232586
