Suppose a Salon Owner Notices That Their Pedicures Are Very

question 77

Multiple Choice

Suppose a salon owner notices that their pedicures are very popular with customers. The owner decides to double of the price of the pedicure in order to raise more revenue. Which of the following statements is most likely to be true?

• A) The owner will double her revenue as a result of the price increase.
• B) More customers will get pedicures because the price indicates it is a desirable service.
• C) The salon's revenue will less than double as customers are disincentivized from getting a pedicure.
• D) Customers will no longer visit the salon as a result of the price increase.

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Definitions:

Marginal Cost

The rise in cost due to the production of an extra unit of a product or service.

Marginal Benefit

Marginal benefit refers to the extra benefit received from the consumption or use of an additional unit of a good or service.

R&D Spending

R&D Spending refers to the money allocated by businesses or governments towards research and development of new products or services.

Interest-Rate Cost-Of-Funds

The interest rate that banks and other financial institutions charge each other for loans, often used as a benchmark for other interest rates.