What is the price elasticity of demand

Reference no: EM131132968

Pricing with Zero Marginal Cost. Consider a natural spring that produces water with a unique taste. The monopolist who owns the spring has a fixed cost of installing plumbing to tap the water but no marginal cost. The demand curve for the spring water is linear. Draw a graph to show the monopolists choice of a price and quantity. At the profit-maximizing quantity, what is the price elasticity of demand? If the spring were owned by a government that applied the marginal principle, what price would it charge?

Reference no: EM131132968

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