If a Profit-Maximizing Restaurant Is Going to Increase Its Revenues

question 64

Multiple Choice

If a profit-maximizing restaurant is going to increase its revenues by charging senior citizens (persons age 65 and over) lower prices than other customers,

• A) the demand of senior citizens for the services of the restaurant must be inelastic.
• B) senior citizens must have lower incomes than other potential customers.
• C) the demand of senior citizens for the services of the restaurant must be elastic.
• D) senior citizens must have higher incomes than other potential customers.
• E) other customers must enjoy food more than senior citizens.

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Definitions:

Initial Direct Costs

Expenses directly associated with obtaining or originating a financing lease, which are often deferred and amortized over the lease term.

Interest Rate Implicit

The interest rate implicit in a lease is the rate of interest that, when applied to the cash flows of the lease, causes the present value of these flows to equal the fair value of the leased asset at the inception of the lease.

Prepaid Asset

Expenses paid in advance by a company, such as insurance or rent, that are recorded as assets until they are utilized.

Unearned Interest: Leases

Interest that has been collected on a lease but not yet earned, often related to the financing element of leases.