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The CEO of a local electricity company has a business monopoly in the area they serve. The CEO estimates that its demand function is =
The CEO of a local electricity company has a business monopoly in the area they serve. The CEO estimates that its demand function is = 8 2P and its marginal cost is constant at $10.
a. What is the own-price elasticity?
b. Express the firm's marginal revenue as a function of price using an inverse linear demand function.
c. What is the profit maximizing price?
d. Illustrate the own-price elasticity and profit maximizing price graphically using Excel.
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