Q1. With the equation that shows the relationship between marginal revenue and price elasticity of demand, explain why a perfectly competitive firm always has its marginal revenue equal to the market price.

Q3. Suppose a firm has a constant marginal cost of $10. The current price of the product is $25, and at that price, it is estimated that the price elasticity of demand is 3.0.

a. Is the firm charging the optimal price for the product? Demonstrate how you know.

b. Should the price be changed? If so, how