Answer:
$1.40
Step-by-step explanation:
Per cent change in price = ($2.02– $1.85)/$1.85 = +9%
Per cent change in demand = (1000 – 850)/1000 = –15%
The elasticity is = ln(1 + per cent change in quantity sold)/ln(1 + per cent change in price)
= ln(1 – 0.15)/ln(1 + 0.09)
= –0.16252/0.08618
= –1.886
Variable cost = $660/1000
Profit-maximising price = [–1.886/(–1.886+1)]*$0.66 = $1.40