the following graph shows a firm with a kinked demand curve. 

a. what assumption lies behind the shape of this demand curve? 

b. identify the firm’s profit-maximizing output and price. 

c. use the graph to explain why the firm’s price is likely to remain the same, even if marginal costs change. 

3. suppose a firm has a constant marginal cost of $10. the current price of the product is $25, and at that price, it is estimated that the price elasticity of demand is −3.0. a. is the firm charging the optimal price for the product? demonstrate how you know. b. should the price be changed? if so, how? draw graph in excel  

Answer rating: 100% (QA)

1a The demand will be more elastic if a firm charges a price higher than what is at the kink since n... View the full answer