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Suppose a​ profit-maximizing monopolist is producing 12001200 units of output and is charging a price of ​$60.0060.00 per unit. If the elasticity of demand for the product is negative 2.00−2.00​, find the marginal cost of the last unit produced.

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Answer:

Marginal Cost = $30

Explanation:

Given that

Price = $60

Elasticity of demand = -2

Recall that

MC = P(1 + 1/Ed)

From monopolist pricing rule as a function of elasticity of demand.

Where MC = marginal cost

Ed = elasticity of demand = -2

Thus

MC = 60 (1 + 1/-2)

= 60 (1 + [-0.5])

= 60 ( 1 - 0.5)

= 60 (0.5)

= 30

MC = $30

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