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Unformatted text preview: C) What is the range in which the mark-up falls? D) Use words to explain what the mark-up measures. E) Could we employ this expression as a measure of market power? Explain why or why not. Q2. In class we mentioned that a firms marginal revenue can be written as a function of the (own) price elasticity of demand. A) Prove that + = 1 1 P MR , where = q P dP dq . B) Show that all firms do not operate on the inelastic portion of their demand curve (i.e. inelastic means 1- ). C) Show that P is never set below a firms marginal cost. 1 | P a g e...
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- Summer '10