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Profit maximization

A firm has capacity limitations and charges $30 for their service during daily peak times. If the market demand elasticity drops from -3 during peak times to -5 at off peak times, how much should the firm charge to earn the maximum profit during off peak times?
A. $20
B. $21
C. $24
D. Not enough information to determine

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Solution Preview

By formula, at the optimal price the following equation holds (peak ...

Solution Summary

The solution answers the question below. The firm's capacity limitation and charges for their services are determined.

$2.19