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Charging the optimal price for the product

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Suppose a firm has a constant marginal cost of $12. The current price is $25 and at that price it is estimated that the price elasticity of demand is -4.0.

a. Is the firm charging the optimal price for the product? Why?

b. Assuming the elasticity remains at --4.0 what is the optimal price?

Reference no: EM131282598

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