When P = -4, the optimal markup on price is:
A)400%.
B)75%.
C)33%.
D)25%.

Question

Quizplus · Accepted Answer

To find the optimal markup, we use the formula: 
Optimal Markup = (P/(P+1)) x 100%
Plugging in P = -4, we get:
Optimal Markup = (-4/(-4+1)) x 100% = 25%
Therefore, the answer is D. The optimal markup formula is:
Markup = (P / (P - C)) * 100
where P is the price and C is the cost.

Substituting P = -4, we get:
Markup = (-4 / (-4 - C)) * 100

Since the markup cannot be negative, we know that C must be less than -4. Let's try some values of C:

When C = -5, Markup = (-4 / (-4 - (-5))) * 100 = 25%
When C = -6, Markup = (-4 / (-4 - (-6))) * 100 = 33.33%
When C = -8, Markup = (-4 / (-4 - (-8))) * 100 = 50%
When C = -16, Markup = (-4 / (-4 - (-16))) * 100 = 300%

We can see that the highest possible markup is 300% which occurs when the cost is very low. However, since a negative price doesn't make sense, we can only consider values of C greater than -4. Out of these values, the highest markup occurs when C is closest to -4. Therefore, the best choice is D with a 25% markup.

When P = -4, the Optimal Markup on Price Is