Suppose a Producer Is Able to Separate Customers into Two

question 170

Multiple Choice

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue, she should:

• A)increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand
• B)decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand
• C)charge the same price to both groups of customers
• D)increase the price for both groups of customers

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Definitions:

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action or the benefits you could have received by taking an alternative action.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing potential benefits missed.

Differential Revenue

The additional revenue that is generated from choosing one alternative over another in decision-making processes.

Differential Analysis

The process of comparing the financial differences between alternative business decisions or scenarios, focusing on costs and benefits that change between options.