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    the profit of the firm

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    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).

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    Solution Preview

    The firm's profit = Total revenue - Total cost

    Total Revenue = price x quantity

    As price elasticity of demand is - 2.5, this implies ...

    Solution Summary

    This solution examines the profit of the firm.