Once a book has been written, would an author facing an inelastic demand curve for the book prefer to raise or lower the book's price? Why?
A. The author would raise or lower the price. Because the author's cost is a sunk cost, any increase or decrease in price will increase revenue and profit.
B. The author would prefer to raise the book's price. Raising prices when demand is inelastic increases revenue. Because the author's cost is a sunk cost, profit also rises.
C. The author would prefer to lower the book's price. Lowering prices when demand is inelastic increases revenue. Because the author's cost is a sunk cost, profit also rises.
D. The author would not change the price. Because the author's cost is a sunk cost, any change in price will decrease revenue and profit.
References
Ans: B. The author would prefer to raise the book's price. Raising prices when demand is inelastic increases revenue. Because the author's cost is a sunk cost, profit also rises
You might also like to view...
The excess burden of a tax refers to the fact that
A) the benefits from a tax exceed the tax revenue. B) the deadweight loss from a tax exceeds the remaining consumer surplus. C) marginal cost is greater than marginal benefit after the tax. D) a tax creates a deadweight loss. E) taxes are split between buyers and sellers.
The law of diminishing marginal utility explains why
A. economists think that utility is a fallacy. B. consumers optimize by spending all of their income. C. individual demand curves have a negative slope. D. marginal utility rises as total utility falls.
Which of the following is a defining characteristic of oligopoly?
A) barriers to entry B) selling a homogeneous good C) selling a differentiated good D) collusion
The goldsmith's ability to create money was based on the fact that
A. withdrawals of gold tended to exceed deposits of gold in any given time period. B. consumers and merchants preferred to use gold for transactions, rather than paper money. C. the goldsmith was required to keep 100 percent gold reserves. D. paper money was rarely redeemed for gold.