Refer to the Accompanying Figure

question 28

Multiple Choice

Refer to the accompanying figure. Suppose this demand curve shows the demand for lattes at a single coffee shop that charges $2.00 for a latte. If the manager wants to increase total revenue, what should the manager do?

• A)Increase the price from $2.00 to $3.00.
• B)Increase the price from $2.00 to $2.50.
• C)Reduce the price from $2.00 to $1.00.
• D)Reduce the price from $2.00 to $1.75.

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Definitions:

Pounds

A unit of weight in the imperial system, equal to 16 ounces or approximately 0.453592 kilograms.

Consumer Equilibrium

A state in which a consumer has allocated their income in a way that maximizes their total utility, given the prices of goods and services.

Total Utility

The total satisfaction received from consuming a particular quantity of goods and services.

Indifference Curve

A graph representing combinations of two goods or services among which a consumer is indifferent, showing preference levels.