Suppose a Factory Is Producing 100 Units and the Price

question 32

Multiple Choice

Suppose a factory is producing 100 units and the price of each unit is $10.If raising the price to $12 per unit results in a drop in sales of 12 units,what is the price elasticity of demand,η?

• A)6
• B)0.6
• C)1.67
• D)0.8
• E)0.17

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Definitions:

Payoff Table

A table that shows the outcomes of different decisions under various states of nature.

Expected Opportunity Loss

The anticipated loss in value resulting from failing to select the best choice among several competing options.

EOL Criterion

A set of standards or conditions used to determine the end of life or discontinuation of a product, service, or process.

Gross Profits

The gap between earnings and the expense of products sold, prior to subtracting overhead costs, salaries, taxes, and interest charges.