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Profit maximization

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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 Summary

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

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

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