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Markup on Cost

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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.


Definitions:

Interval

A range of numbers between two set points.

Real Number Line

A one-dimensional line on which every point corresponds to a real number and every real number to a point.

Real Number Line

A line that graphically represents all possible real numbers, where each point on the line corresponds to a unique real number.

Inequality

An inequality is a mathematical statement indicating that two expressions are not equal, represented by symbols such as > (greater than), < (less than), ≥ (greater than or equal to), or ≤ (less than or equal to).

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