The marginal revenue of a firm is Rs. 10 and the price it charges per unit is Rs. 30. Assuming that the firm is a profit maximiser, what is the own price elasticity of demand for the firm at that point of profit maximisation?

Correct option is B

Correct Option: B.  $$-1.5$$​​
Explanation:
1. The relationship between Marginal Revenue ($$MR$$​), Price ($$P$$​), and the Own Price Elasticity of Demand ($$E_d$$​) is given by the formula: $$MR = P \left( 1 + \frac{1}{E_d} \right)$$.​
2. ​​Here, $$E_d$$ denotes the actual algebraic value of elasticity, which is negative for normal goods.

Information Booster:
1. Substitution:  

• Given $$MR = 10$$ and $$P = 30$$​.
• ​$$10 = 30 \left( 1 + \frac{1}{E_d} \right)$$​​
  

2. Calculation:

• ​$$\frac{10}{30} = 1 + \frac{1}{E_d}$$​​
  
• ​$$\frac{1}{3} = 1 + \frac{1}{E_d}$$​​
  
• ​$$\frac{1}{E_d} = \frac{1}{3} - 1$$​​
  
• ​$$\frac{1}{E_d} = -\frac{2}{3}$$​​
  
• ​$$E_d = -1.5$$​​
  

Additional Knowledge:

• Magnitude vs. Sign: Sometimes elasticity is treated as a positive magnitude ($$|E_d|$$​). If using the magnitude formula $$MR = P(1 - \frac{1}{|E_d|})$$​, the result is $$1.5$$​. However, since $$-1.5$$ is an option, it is the technically correct answer as it reflects the inverse relationship between price and quantity demanded.
  
• Profit Maximization: For a firm to maximize profit, MR must equal Marginal Cost (MC). Since MC is always positive, MR must be positive. This implies that the firm always operates on the elastic portion of the demand curve ($$|E_d| > 1$$​).