If the optimal markup on cost is 25%, the optimal markup on price is:
A) 20%
B) 25%
C) 50%
D) 100%
Optimal markup on cost = 1/4
-1 / Ep+1 = 1/4
-4 = Ep+1
-4 - 1 = Ep
Ep = -5
optimal markup on price = -1/Ep
optimal markup on price = -1/-5 = 1/5 = 20%
optimal markup on price = 20%
Option A is correct.
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