ABC, Inc. produces an output that corresponds to minimum average cost which is $50.00. The firm wishes to adopt a 50% mark-up on unit cost. A recent study indicates that the price elasticity of demand is about -2.5 for ABC, Inc's producut. Will this pricing decision maximize the firm's profits? (Show your work).© BrainMass Inc. brainmass.com October 10, 2019, 1:03 am ad1c9bdddf
The firm's profit = Total revenue - Total cost
Total Revenue = price x quantity
As price elasticity of demand is - 2.5, this implies ...
This solution examines the profit of the firm.