3.2. MP34U. Music Ventures sells a very popular MP3 player, the MP34u. The firm currently sells one million units for a price of $100 each. Marginal cost is estimated to be constant at $40, whereas average cost (at the output level of one million units) is $90. The firm estimates that its demand elasticity (at the current price level) is approximately -2. Should the firm raise price, lower price, or leave price unchanged? Explain.

3.2. MP34U. Music Ventures sells a very popular MP3 player, the MP34u. The firm currently sells one million units for a price of $100 each. Marginal cost is estimated to be constant at $40, whereas average cost (at the output level of one million units) is $90. The firm estimates that its demand elasticity (at the current price level) is approximately -2. Should the firm raise price, lower price, or leave price unchanged? Explain.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

ChapterB: Differential Calculus Techniques In Management

Section: Chapter Questions

Problem 3E

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