A Supplier of Fur Coats Estimates That the Price Elasticity

question 12

Multiple Choice

A supplier of fur coats estimates that the price elasticity of demand for its coats is -3.75.The firm has determined that an additional $100,000 in advertising would generate $275,000 in additional revenues.You would advise the firm to:

• A) advertise, because the marginal revenues are greater than the cost of advertising.
• B) spend only $50,000 on advertising, because the marginal revenue from an additional dollar of advertising is less than $3.75.
• C) abandon the advertising plan, because the demand elasticity is greater than 1 (in absolute value).
• D) abandon the advertising plan, because the marginal revenue from an additional dollar of advertising is less than $3.75.
• E) advertise, because the fur coats are a luxury item.

---

Definitions:

Writing Report

The process of creating a structured document that conveys information, findings, or results related to a specific topic or investigation.

Work Plan

A detailed outline of the tasks, timelines, and resources required to complete a project or achieve an objective.

Opening Statement

The initial speech or written remark in a debate, presentation, or written work that outlines the main arguments or points.

Statement Purpose

A declaration outlining the intent or objectives of a document, presentation, or project.