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In: Economics

Consider a monopolist facing a constant elasticity demand curve ?(?) = 12? ^−3 . a) Assume...

Consider a monopolist facing a constant elasticity demand curve ?(?) = 12? ^−3 .

a) Assume that the total cost function is ??(?) = 5 + 4?. Use the inverse elasticity pricing rule (IEPR) to obtain the profit maximizing price that this monopolist should charge.

b) How would your result in part (a) change if the demand curve changes to ?(?) = 12? ^−5 , but still assuming the same cost function as in part (a)? Interpret your answer.

c) Consider a monopolist facing a constant elasticity demand curve ?(?) = 12? ^−3 . Assume that the total cost function is ??(?) = 5 + 2?^ 2 . Use the inverse elasticity pricing rule (IEPR) to obtain the profit-maximizing price that this monopolist should charge.

d) How would your result in part (c) change if the demand curve changes to ?(?) = 12?^ −5 , but still assuming the same cost function as in part (c)? Interpret your answer.

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Rahul Sunny answered 2 years ago
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