Suppose a firm faces the demand curve which gives a constant price elasticity of demand of -2.

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Suppose a firm faces the demand curve which gives a constant price elasticity of demand of -2. (Lerner Index)

A. If the firm's marginal cost is constant at $2, what is the profit-maximizing price and quantity?

B. If the firm's marginal cost increases to a constant $3, what is the profit-maximizing price and quantity?

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Microeconomics and Behavior

ISBN: 978-0078021695

9th edition

Authors: Robert Frank

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Question Posted: Mar 01, 2017 01:18 PM

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Suppose a firm faces the demand curve which gives a constant price elasticity of demand of -2.

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Lerners index measures market powerLerners index is equal to inverse of absolute value of e...View the full answer

Microeconomics and Behavior

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