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Egon's Bakery competes with Zuul's Pastry Shop in the market for mini cakes. Egon's demand function is QE(PE.PZ) = 200-10PE + Pz, while Zuul's
Egon's Bakery competes with Zuul's Pastry Shop in the market for mini cakes. Egon's demand function is QE(PE.PZ) = 200-10PE + Pz, while Zuul's is Qz(Pz.PE)=223-10PZ + PE. Egon's marginal cost per cake is $6, while Zuul's is $7. a. What is Egon's own-price demand elasticity at the Nash Equilibrium, rounding to the hundredths place? b. What is Egon's Lerner Index at the Nash Equilibrium, rounding to the hundredths place? c. Does markup equal inverse elasticity for Egon? d. Is the same true for Zuul? Provide your calculations.
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