Demonstrate how you know firm charging the optimal price

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Q. Consider the production function q = K0.5L0.5 for a firm operating in a perfectly competitive market. Suppose that, in the short run, the amount of capital is fixed at 1. The wage paid to each worker is $2 and the cost of capital is $1 m. If this firm for some reason, all of a sudden, becomes a monopolist, write out its average revenue function

Q. Suppose a firm has a constant marginal cost of $10. The current price of the product is $25, and at that price, it is estimated that the price elasticity of demand is -3.0. Is the firm charging the optimal price for the product? Demonstrate how you know.

Reference no: EM1359210

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