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4. (10 points) A rm is a monopolist. It charges $125 and its marginal cost is $100, so its markup is 25%. (This markup is
4. (10 points) A rm is a monopolist. It charges $125 and its marginal cost is $100, so its markup is 25%. (This markup is fairly small, so the rm's demand is probably quite elastic.) (a) What elasticity of demand is consistent with charging a 25% markup? (b) If the rm's demand is actually Q = 700 4P, what is the elasticity of demand at a price of $125? (c) Based on this elasticity calculation, would you recommend that the rm raise or lower its price
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