Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8 . You should
a. increase the price of ice cream.
b. decrease the price of ice cream.
c. decrease the cost of operating the ice cream shop.
d. increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2.
b
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Predatory pricing
A) is extremely hard to document in the U.S. economy today. B) is most often practiced in the retailing industry. C) is not legal under U.S. law but is regularly practiced by foreign firms competing in the United States. D) is principally responsible for the decline of competition in the oil industry.
If cherries cost twice as much as dates, and the last cherry consumed provides twice as much utility as the last date consumed, the consumer is maximizing utility
a. True b. False Indicate whether the statement is true or false
Rent controls are an example of a
A. price floor for the consumer and a price ceiling for the producer. B. nonprice rationing device. C. price floor. D. price ceiling.
Pappy's Popcorn Emporium operates in a perfectly competitive industry and hires you as an economic consultant. Pappy's is currently producing at a point where market price equals its marginal cost. Its total revenue exceeds both its total variable cost and its total cost. You advise Pappy's to
A. raise its price so that it can increase its profit. B. cease production immediately because it is incurring a loss. C. continue to produce in the short run to maximize its profit. D. lower its price immediately in anticipation of new firms entering the industry.