Publix Has 2,700 Pounds of Bananas with a Total Cost

question 116

Multiple Choice

Publix has 2,700 pounds of bananas with a total cost of $864.Because the bananas have become too ripe, Publix is contemplating whether it should use the bananas to bake banana bread or sell the bananas 'as is' to the homeless center for $1,485.In addition to the cost of the bananas, it would cost $2,565 to convert the bananas into bread, which could then be sold for a total of $4,480.However, a special oven to bake the bread will have to be rented for an additional $300.What is the incremental effect on income if Publix converts the bananas to banana bread?

• A)Increase of $130
• B)Increase of $430
• C)Decrease of $734
• D)Increase of $1,615

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Definitions:

Midpoint Method

A technique used to calculate the elasticity of demand or supply between two points by taking the average of the initial and final quantities and prices.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, elasticity being greater when a small price change causes a large change in quantity demanded.

Consumption

The use of goods and services by households, contributing to their living standards and economic activity.

Midpoint Formula

A method used in economics and statistics to calculate the elasticity of a variable, or the percentage change in one variable in response to a percentage change in another.