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.

Understand the concept of Pareto optimality in the context of public goods and marginal rates of substitution.

Apply economic theory to calculate socially efficient levels of production taking into account external costs.

Differentiate between private and public goods and their implications for utility in economic models.

Analyze the impact of single-peaked preferences on collective decision-making and public goods provision.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including the cost of materials and labor.

Landscaping Supplies

Materials and products used in the creation and maintenance of landscaped areas, such as plants, soil, mulch, and tools.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.

Accounts Payable

Represents the amount a company owes to suppliers or vendors for goods or services received that haven't been paid for yet.