A Firm Is Currently Producing in the Inelastic Portion of Its

question 138

Multiple Choice

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) Reduce price, because if it reduces price and demand is inelastic, total revenue will increase.
• C) Increase price, because if it increases price and demand is inelastic, total revenue will increase.
• D) Continue selling at the same price, but increase the amount it produces.

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