Afirm in the market for designer jeans has some degree of monopoly power. the demand curve it faces has a price elasticity of demand of negative 4−4, while the price elasticity demand of the market is negative 3.5−3.5. moreover, the firm has a constant marginal cost of $65.0065.00. using the rule of thumb for pricing, calculate the firm's profit-maximizing price.

$86.67 is the profit maximizing price for the monopolist

Explanation:

In order to find the profit maximizing price for the monopolist using its price elasticity and marginal cost we have to use the formula

Price= Marginal cost* (elasticity/elasticity+1)

Marginal cost = $65.0065

Elasticity = -4

Price = 65.0065 *(-4/-4+1) = 65.0065*(-4/-3)= 86.67

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