Problem
In addition to the hard-drive-based iPod, Apple produces a flash-based audio player. Its 512MB iPod Shuffle (which does not have a hard drive) sold for $99 in 2005. According to iSuppli, Apple's per-unit cost of manufacturing the Shuffle is $45.37 (Brian Dipert, "Song Wars: Striking Back Against the iPod Empire," June 9, 2005). What is Apple's price/marginal cost ratio? What is its Lerner Index? If we assume (possibly incorrectly) that Apple acts like a short-run profit-maximizing monopoly in pricing its iPod Shuffle, what elasticity of demand does Apple believe it faces?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.