Question
Suppose a firm has a constant marginal cost of $20. The current price of the product is $35 and at that price, it is estimated
Suppose a firm has a constant marginal cost of $20. The current price of the product is $35 and at that price, it is estimated that the price elasticity of demand is -4.
i) Is the firm charging the optimal price for the product? Demonstrate how you know.
ii) Should the price be changed? If so, how?
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Introductory Econometrics A Modern Approach
Authors: Jeffrey M. Wooldridge
4th edition
978-0324581621, 324581629, 324660545, 978-0324660548
