A firm started advertising its product and this changed the product’s elasticity from -2 to -1.5. Using the formula (P – MC)/P = 1/ |e| the firm should A.raise price from $10 to $15B.reduce price from $15 to $10C.raise price from $7.50 to $10D.reduce price from $10 to $7.50 Please show me how you got this answer. I got A.

If a given price level the demand is elastic then firm should reduce its price, the percentage…

Answered: A firm started advertising its product…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 6.3IP

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‍A firm started advertising its product and this changed the product’s elasticity from -2 to -1.5. Using the formula ‍(P – MC)/P = 1/ |e| the firm should

‍raise price from $10 to $15

‍reduce price from $15 to $10

‍raise price from $7.50 to $10

‍reduce price from $10 to $7.50

Please show me how you got this answer. I got A.

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