This exam is closed-book closed-note. Simple calculators are allowed. (If you ne

Question

This exam is closed-book closed-note. Simple calculators are allowed. (If you need to borrow one of my calculators, please bring your photo ID to the front of room.) There are three problems worth 30 points each and two multiple choice questions worth 5 points each. It's usually a good idea to skim the entire exam before starting to work. Answer the easiest question first. If you don 't understand something, please ask me. There is one blank page at the end of the exam. use it when you need more space. After that get more paper from me. Answer explanation (verbal and/or math) will get zero credit. A profit-maximizing monopoly sets a price of $150 per unit for an item that has a marginal cost of $60. Calculate the price elasticity of demand. Calculate the Lerner index. Profit maximizing monopoly price = 150 Marginal cost (Mc) = 60

Explanation / Answer

L= P - MC/P

150-60/150= 0.6

lerner index is written as -1/ed in monopoly when the price choosen is that which maximizes profit.

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