Why is the ratio of the monopolys price to its marginal cost, p/MC, larger if the demand

Question:

Why is the ratio of the monopoly’s price to its marginal cost, p/MC, larger if the demand curve is less elastic at the optimum quantity? Can the demand curve be inelastic at that quantity?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Managerial Economics and Strategy

ISBN: 978-0321566447

1st edition

Authors: Jeffrey M. Perloff, James A. Brander

See More Books

Question Posted: Nov 13, 2014 03:35 AM

See More Questions

The coefficient of determination r 2 is the ratio of which two types of variations? What does r 2 measure? What does 1 - r 2 measure?
Why is the ratio scale the most powerful of the four scales.
The asset turnover ratio (ATR) is the ratio of a company?s revenues to the value of its assets (indicating its efficiency in deploying its assets). We should not use the standard deviation to compare...
What pricing system is used to price the water you use at your college or university? Does this pricing system affect your behavior about water use (length of showers, etc.)? How? Could you recommend...
Using the information shown in exercise 3.29, produce an income statement for the period ended 30 June 2013. In exercise 3.29 Presented below are financial statement items for Contanzos City (a sole...
Show the content of registers A, B, Q, and SC during the decimal multiplication (Fig. 10-22) of (a) 470 x 152 and (b) 999 199. Assume three-digit registers and take the second number as the...
Name and describe the two basic types of warehouses. LO.1
The following events pertain to Super Cleaning Company: 1. Acquired $10,000 cash from the issue of common stock. 2. Provided $15,000 of services on account. 3. Provided services for $5,000 cash. 4....
Practice Exercise 9-1 The inventory of Cullumber Company on December 31, 2017, consists of the following items, Part A419 A435 A545 1515 1721 ABS 1999 Cost per Quantity unit 3,200 $8.00 2,720 6.00...
A double-acting hydraulic cylinder is used to actuate a linear joint of an industrial robot. The inside diameter of the cylinder is 3.5 in. The piston rod has a diameter of 0.5 in. The hydraulic...
The inverse demand function a monopoly faces is p = 10Q0.5. The firms cost curve is C(Q) = 5Q. What is the profit-maximizing solution?
When will a monopoly set its price equal to its marginal cost?
The rotational spectrum of diatomic oxygen shows spectral lines spaced 0.356 meV apart in energy. Find O 2 s atomic separation.
The Penguin Textile Company sells shirts for men and boys. Results for January 2 0 2 3 are summarized below. Men's Boy's Total Revenue $ 1 7 2 , 8 0 0 $ 7 2 , 0 0 0 $ 2 4 4 , 8 0 0 Variable costs 1 2...
SINGLE, MARRIED FILING SEPERATELY, OR HEAD OF HOUSEHOLD SINGLE, MARRIED FILING SEPERATELY, OR HEAD OF HOUSEHOLD Over $0 $12,500 $50,000 But Not Over $12,500 $50,000 Tax Due Is 4% of taxable income...
17. S T D -3 -2 graph of glx) 2 The graph of the continuous function g is shown above for -46x4. The Function g is twice differentiable, except at x=0. let & be the function with flo1=-2 and f'(x) =...
Tim works for HydroTech, a manufacturer of high-pressure industrial water pumps. He reports directly to the CFO, and she has asked him to calculate HydroTech's WACC. He has gathered the following...
You are appraising a 15,450 square foot (SF) building and using the Cost Approach. The base cost is $50/SF, the local multiplier is 1.05, the current cost multiplier is 0.92. The land value is...
Trigger PLC is a manufacturer of computer components and a decision is required on a proposal to invest 1,800,000 on a new machine in order to move into a new market for components. The financial...
4. Jobe dy -Y 2 et by
How can emerging market economies avoid the problems of currency mismatch?
1. Book Pricing: Publishers versus Authors. Consider the problem of setting a price for a book. The marginal cost of production is constant at $20 per book. The publisher knows from experience that...
1. Book Pricing: Publishers versus Authors. Consider the problem of setting a price for a book. The marginal cost of production is constant at $20 per book. The publisher knows from experience that...
1. Book Pricing: Publishers versus Authors. Consider the problem of setting a price for a book. The marginal cost of production is constant at $20 per book. The publisher knows from experience that...
Ventaz Corp manufactures small windows for back yard sheds. Historically, its demand has ranged from 30 to 50 windows per day with an average of 4646. Alex is one of the production workers and he...
Which of the following statements is not true regarding the $500 credit for dependent other than a qualifying child credit. Cannot be claimed on the same tax return if the child tax credit is also...
Grind Co. is considering replacing an existing machine. The new machine is expected to reduce labor costs by $127,000 per year for 5 years. Depreciation on the new machine is $57,000 compared with...

Why is the ratio of the monopolys price to its marginal cost, p/MC, larger if the demand

Question:

Step by Step Answer:

The Lerner Index or price markup is the ratio of the difference between price and marginal cos...View the full answer

Managerial Economics and Strategy

Students also viewed these Economics questions