PNG's Managers Estimate That a 50% Increase in Price Would

question 11

Multiple Choice

PNG's managers estimate that a 50% increase in price would cause an 80% reduction in the quantity of product sold. Total fixed costs for the product are $5,000 and total variable costs are $4,000, based on production of 400 units. The following values may be useful: $\begin{array} { l l } \ln ( 0.2 ) = - 1.609 & \ln ( 1.5 ) = 0.405 \\\ln ( 0.5 ) = - 0.693 & \ln ( 4,000 ) = 8.294 \\\ln ( 0.8 ) = - 0.223 & \ln ( 5,000 ) = 8.517\end{array}$ PNG's price elasticity of demand is:

• A) -0.252
• B) +0.322
• C) -3.973
• D) +3.108

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specified period, resulting in net profit or loss.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income.

Debit Column

A column in accounting ledgers and financial statements used to record increases in asset or expense accounts, and decreases in liability, equity, or revenue accounts.

Credit Column

A column in accounting records or financial statements used to record amounts that reduce balances in asset or expense accounts, or increase balances in liability, equity, or revenue accounts.