A manufacturer produces two types of computer software, Word processing (W) and Spreadsheet (S), which is offered to two different retail outlets (#1 and #2). The following table shows the maximum price each retail outlet is willing to pay for each individual software product. Product W Product S Retail #1 $170 $105 Retail #2 $95 $135 What is the optimal pricing strategy that will maximize
revenue for the manufacturer, given the maximum the retail outlets are willing to pay?
a. Bundle both products (W and S) and sell them at $230.
b. Price product W at $170 and Product S at $135.
c. Price product W at $170 and Product S at $170.
d. Price product W at $95 and Product S at $105.
e. Bundle both products (W and S) and sell them at $275.
a
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Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to
a. $6. b. $7. c. $8. d. $9.
During October and November 2008, gasoline prices were falling dramatically making travel by car less expensive but air travel prices were as high as ever
If travel by car is less expensive, and income remains the same, describe the substitution and income effects that occur for travelling by car. A) If travelling by car is a normal good, the substitution effect would cause an increase and the income effect would cause a decrease in travelling by car. B) If travelling by car is a normal good, both the substitution and income effects would be cause an increase in travelling by car. C) If travelling by car is a normal good, the substitution effect would cause a decrease and the income effect would cause an increase in travelling by car. D) If travelling by car is a normal good, both the substitution and income effects would cause a decrease in travelling by car.
The AD-AS model implies that, in the long run,
a. the economy adjusts very quickly to demand shocks b. changes in government spending have no effect on GDP c. the price level never changes d. a mixture of fiscal and monetary policy is necessary to achieve full employment e. the Fed controls output
A profit-maximizing firm will hire inputs until MRP = P of the input
a. True b. False Indicate whether the statement is true or false