A price searcher faces a demand that is given by P = 100/Q.
a. What does the Marginal Revenue curve look like (graph it).
b. What is the value of elasticity of demand at quantities Q = 10; Q = 50; Q = 100? Can you make a general statement about the value of elasticity of demand? (If so, do so; if not, explain why you cannot.)
c. If there are fixed costs of production, can you determine the wealth maximizing output? (for example, if the Total Cost function is given by TC = 10 + Q, what is the wealth maximizing output?)
d. Are there any “common sense” issues with your answer to part (c)?