Restaurants and retail stores often give 10% senior citizen discounts. Use the concept of elasticity to explain how this can be profit maximizing behavior.
What will be an ideal response?
Senior citizens living on a low income and with more leisure time may have more price elastic demand than people who are still working. By lowering prices to people who have higher elasticity the restaurants and retail stores may actually be increasing their profits.
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The primary reason conglomerate mergers are the most difficult to attack under the antitrust laws is that
a. these mergers always involve a domestic firm and a foreign firm b. these mergers always involve the largest corporations in the United States c. there is no statute the government can use to attack them in court d. these mergers do not increase concentration in any market e. these mergers are always beneficial
The consumption function assumes that
What will be an ideal response?
The basic rule for maximizing net revenue is: Charge a price, or set of prices, so that
A) expected marginal revenue equals expected marginal cost. B) expected marginal revenue exceeds expected marginal cost. C) expected marginal revenue is equal to or less than expected marginal cost. D) marginal revenue turns out in practice to be equal to or less than marginal cost. E) marginal revenue turns out in practice to be greater than marginal cost.
For a given market demand curve, if the market clearing price increases, then the amount of producer surplus will
A) decrease. B) increase. C) become negative. D) none of the above due to insufficient information.