A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it, assuming it wants to raise revenue?
A. Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve.
B. Continue selling at the same price, but increase the amount it produces.
C. Reduce price, because if it reduces price and demand is inelastic, total revenue will increase.
D. Increase price, because if it increases price and demand is inelastic, total revenue will increase.
Answer: D
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Refer to the above figures. A quota is placed on a foreign good. Which figure represents the situation in the domestic market for a competing domestic good?
A) Panel A B) Panel B C) Panel C D) Panel D
Refer to the above diagrams. Which of the following is a feasible rate at which X and Y might be exchanged?
A. 1X for 3Y
B. 1X for 1.5Y
C. 1X for 2.5Y
D. 1X for .5Y
A new domestic industry with a potential for economies of scale is a(n):
A) agglomeration industry. B) infant industry. C) monopsonistic industry. D) competitive industry.
Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume goods X and Y are normal goods and the price of good X decreases. Then the substitution effect will lead consumers to consume:
A. more of good X and less of good Y. B. more of good X and more of good Y. C. less of good X and less of good Y. D. less of good X and more of good Y.