Constant price elasticity of demand

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Suppose a firm faces the demand curve which gives a constant price elasticity of demand of -2. (recall the Lerner index) 1. If the firm's marginal cost is constant at $2, what is the profic-maximizing price and quantity? 2. If the firm's marginal cost increases to a constant $3, what is the profit-maximizing price and quantity?

Reference no: EM13995319

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