Question: Pauline has been selling 5,000 widgets per year for $8.50. When she raised the price to $9.50 she sold only 4,000 widgets. What is the

Pauline has been selling 5,000 widgets per year for $8.50. When she raised the price to $9.50 she sold only 4,000 widgets. What is the elasticity of demand? If her marginal cost is $4 for each widget produced, what is her optimal markup and what is her actual markup? In this case, do you believe increasing the price was a good idea?

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