A company selling a typical good (non-Giffen) facing inelastic demand will be CE
ID: 1220333 • Letter: A
Question
A company selling a typical good (non-Giffen) facing inelastic demand will be CERTAIN to increase profits by doing each of the following EXCEPT: (assume each of these is independent of any other change…in other words, each represents the ONLY change that will occur)
lowering costs
raising prices
lowering prices
selling fewer products
we need more information; each of the above could result in increased profits
a)lowering costs
B0raising prices
c)lowering prices
D)selling fewer products
e)we need more information; each of the above could result in increased profits
Explanation / Answer
d) selling fewer products.
The above options such as lowering cost would impact the firm in cornering in more profits. Similarly is the case when the firm raises the prices because it would lead the firm to make more profits. Also when the firm lowers prices, it will lead the product to sell more and therefore more revenue.
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