## Problems: Natural Monopoly: Apple

Apple is the only company that can produce the iPhone. Suppose the demand for iPhones in 2011 is:

Q = 60,000,000 - 50,000 x $P.

For what prices is the elasticity of demand for iPhones greater than one?

For what prices is the elasticity of demand for iPhones less than one?

At what price is the elasticity of demand for iPhones equal to one?

What can you say about the price (i.e., adding up what the purchaser pays Apple and what the phone company pays Apple) Apple should have charged for iPhones in 2011 to maximize its year-2011 profit?

Suppose that you learn that it only costs Apple $50 to purchase and ship an additional iPhone to the U.S. Does this allow you to sharpen your answer?