Suppose the own price elasticity of market demand for retail gasoline is −0.6, the Rothschild index is 0.4, and a typical gasoline retailer enjoys sales of $1.5 million annually 1. What is the price elasticity of demand for a representative gasoline retailer’s product? 2. Now assume a Lerner index of 0.6, and a marginal cost of $40, What price does this firm charge its customers? 3. By what factor does this firm mark up its price over marginal cost?
Suppose the own price elasticity of market demand for retail gasoline is −0.6, the Rothschild index is 0.4, and a typical gasoline retailer enjoys sales of $1.5 million annually 1. What is the price elasticity of demand for a representative gasoline retailer’s product? 2. Now assume a Lerner index of 0.6, and a marginal cost of $40, What price does this firm charge its customers? 3. By what factor does this firm mark up its price over marginal cost?
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 13CQ
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Suppose the own price elasticity of market demand for retail gasoline is −0.6, the Rothschild index is 0.4, and a typical gasoline retailer enjoys sales of $1.5 million annually
1. What is the price
2. Now assume a Lerner index of 0.6, and a marginal cost of $40, What price does this firm charge its customers?
3. By what factor does this firm mark up its price over marginal cost?
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