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?
Answer to relevant QuestionsWhen will a monopoly set its price equal to its marginal cost?A monopoly has an inverse demand function given by p = 120 – Q and a constant marginal cost of 10. Calculate the deadweight loss if the monopoly charges the profit-maximizing price.Based on the information in the “Botox” Mini- Case, what would happen to the equilibrium price and quantity if the government had set a price ceiling of $ 200 per vial of Botox? What welfare effects would such a policy ...Under what circumstances will a drug company charge more for its drug after its patent expires?If a monopoly faces an inverse demand function of p = 90 – Q, has a constant marginal and average cost of 30, and can perfectly price discriminate, what is its profit? What are the consumer surplus, total surplus, and ...
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