Determine approximate mark up over cost


Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices.

Price of crackers

Quantity Demanded (per month)

$3

80

$2.5

120

$2

160

$1.5

200

$1

240

$1.00 - $1.50:

$1.50 - $2.00:

$2.00 - $2.50:

$2.50 - $3.00:

If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity.

Assume the competitive market shown below faces a short run price of $10. Using the graph below, identify the following:

Profit maximizing output:      

Approximate mark up over cost

In the long run, the price falls to $7.50. Why does this happen?

What is the new profit maximizing output?

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Microeconomics: Determine approximate mark up over cost
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