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A friend has decided to open a coffee shop nearby to campus. She knows that her coffee will be directly comparable to another shop which faces price elasticity of demand of ɛ=- 0.8 and sells coffee at P=$3/cup. She asks you to provide a range of her expected profit margin. What is the range? (Hint: Assume her business can range in market structure between a perfectly competitive firm and a monopoly)

A friend has decided to open a coffee shop nearby to campus. She knows that her coffee will be directly comparable to another shop which faces price elasticity of demand of ɛ=- 0.8 and sells coffee at P=$3/cup. She asks you to provide a range of her expected profit margin. What is the range? (Hint: Assume her business can range in market structure between a perfectly competitive firm and a monopoly)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A friend has decided to open a coffee shop nearby to campus. She knows that her coffee will be directly comparable to another shop which faces price elasticity of demand of ɛ=- 0.8 and sells coffee at P=$3/cup. She asks you to provide a range of her expected profit margin. What is the range? (Hint: Assume her business can range in market structure between a perfectly competitive firm and a monopoly)
Transcribed Image Text:A friend has decided to open a coffee shop nearby to campus. She knows that her coffee will be directly comparable to another shop which faces price elasticity of demand of ɛ=- 0.8 and sells coffee at P=$3/cup. She asks you to provide a range of her expected profit margin. What is the range? (Hint: Assume her business can range in market structure between a perfectly competitive firm and a monopoly)
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