Explain why the marginal revenue a firm with market power

Question

Problem

In the chapter, we noted that the marginal revenue a seller receives can be expressed as MR = P + (ΔP/ΔQ) × Q.

a. Using this formula as a starting point, show that marginal revenue can be expressed as MR = P(1 + 1/ E^D), where E^Dis the price elasticity of demand.

b. Using your knowledge about the price elasticity of demand, explain why the marginal revenue a firm with market power receives must always be less than the price.

c. Using your knowledge of the price elasticity of demand, explain why the marginal revenue a perfectly competitive firm receives must be equal to the price.

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.