Answer:
YES
Explanation:
The percentage markup of price over marginal cost for a profit maximizing monopolist is (Price -Marginal cost) / Price = -1 / elasticity of demand
(price - 20) / price = -1 / -2.6
(price - 20) / price = 0.3846
price - 20 = 0.3846 price
0.6154 x price = 20
price = $32.50 or price = 1.625 x Marginal cost
The relationship between price and marginal cost is constant, since the monopolist will want to keep maximizing its profit. So if marginal costs increase by 15%, then the price will increase by 15%:
price x 1.15 = 1.625 x Marginal cost x 1.15
