TTV Corporation's Managers Estimate That a 50% Increase in Price

question 47

Multiple Choice

TTV Corporation'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: $$\begin{array} { l } \ln ( 0.2 ) = - 1.609 \quad \ln ( 1.5 ) = 0.405 \\\ln ( 0.5 ) = - 0.693 \quad \ln ( 4,000 ) = 8.294 \\\ln ( 0.8 ) = - 0.223 \quad \ln ( 5,000 ) = 8.517 \\\end{array}$$ TTV's price elasticity of demand is:

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

Identify specific areas of the brain responsible for processing and responding to environmental stimuli.

Understand the concept of consumer surplus and how it is calculated.

Understand the concept of producer surplus and how it is calculated.

Recognize the effects of price ceilings on consumer and producer surplus.

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Definitions:

Factory Heating

An operational expense associated with maintaining an appropriate temperature within a manufacturing or production facility, often categorized as a facility overhead cost.

Conversion Costs

The combination of direct labor and manufacturing overhead costs incurred to convert raw materials into finished products.

Direct Materials

The raw materials that are consumed in the manufacturing process and are directly allocated to the product.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor, such as maintenance, utilities, and equipment depreciation.