Essay
Markup on Cost. King Midas Muffler, Inc., offers automobile muffler replacement at a number of outlets in the greater Boston area. The company recently initiated a policy of matching the lowest advertised competitor price. As a result, King Midas has been forced to reduce the average price for mufflers by 3%, but has enjoyed an 18% increase in customer traffic. Meanwhile, marginal costs have held steady at $74.97 per muffler.
A. Calculate the point price elasticity of demand for mufflers.
B. Calculate King Midas' optimal price and markup on cost.
Correct Answer:
Verified
Correct Answer:
Verified
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