Share holder maximization model of a firm

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Reference no: EM136572

Q1. From the price elasticity calculated above we can say that if the price of x increases by 10% then its demand will fall by 3.87% approx. Since the elasticity of demand is inelastic, total revenue test of elasticity states that total revenue will increase as price increases.

Q2. With the statement are you agree or disagree: "A monopolist constantly charges chief possible price."? Explain. Why an individual firm cannot raise its price by reducing output - lower its price to increase sales quantity in a purely competitive market?

Q3. In the context of share holder maximization model of a firm, what is the expected impact of each of the event on the value of the firm?

Reference no: EM136572

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