Business Finance – Economics Assignment

Answer these questions about Monopoly and monopolistic competition: 

1-) You are the manager of a monopoly.

A) If the marginal cost of your product is $100 and the price elasticity of demand for your product is 2, what markup of price over marginal cost do you set?

B) If the price elasticity of demand is 3 rather than 2, what markup do you set?

C) Use your knowledge of factors that affect the magnitude of the price elasticity of demand to your answers to parts a and b.

2-) Explain how marginal analysis can help determine the profit-maximizing quantity for managers of monopolies, dominant firms, and monopolistically competitive firms.

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