The managerial technique of markup pricing is consistent with the economic theory of profit maximization when the markup is positively related to the price elasticity of demand.

Question

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Markup pricing is not consistent with the economic theory of profit maximization when the markup is positively related to the price elasticity of demand. In fact, the optimal markup is inversely related to the price elasticity of demand; as elasticity increases (demand becomes more sensitive to price changes), the optimal markup should decrease to maximize profits.

The Managerial Technique of Markup Pricing Is Consistent with the Economic