What is the economic interpretation

Reference no: EM13175946

Consider A monopolist that faces the constant elasticity demand curve y(p) = p^a where a < 0, and the total cost function c() given by c(y) = ky, where k > 0.Also assume that the monopolist pays a quantity tax of t > 0. set up the monopolists profit maximization problem with price as the decision variable and find the profit maximizing price, say p(t)>0. Show that a<-1 must hold for the profit maximizing price to be positive. What is the economic interpretation of this condition?

Reference no: EM13175946

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