Unformatted text preview: C) What is the range in which the markup falls? D) Use words to explain what the markup 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 firm’s 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 firm’s marginal cost. 1  P a g e...
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 Summer '10
 JackParkinson
 Price Elasticity, Supply And Demand, residual demand curve

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