Suppose a producer can manufacture her smartphones at a constant marginal cost of $300. She practices a rule-of-thumb for pricing with an “incremental margin percentage” of 70%. i) Find the price she should charge for her smartphones. ii) Using the result in (i), find the implied demand elasticity for her smartphones.
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Suppose a producer can manufacture her smartphones at a constant marginal cost of $300. She practices a rule-of-thumb for pricing with an “incremental margin percentage” of 70%.
i) Find the price she should charge for her smartphones.
ii) Using the result in (i), find the implied demand elasticity for her
smartphones.
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