A Firm Has Capacity Limitations and Charges $30 for Their

question 45

Multiple Choice

A firm has capacity limitations and charges $30 for their service during daily peak times.If the market demand elasticity drops from -3 during peak times to -5 at off peak times, how much should the firm charge to earn the maximum profit during off peak times?

• A)$20.
• B)$21.
• C)$24.
• D)not enough information to determine.

---

Definitions:

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor, such as labor or capital.

Marginal Revenue Product

The extra income produced by using an additional unit of a resource or input in the production process.

Wage Rate

The fixed amount of compensation or payment a worker receives from an employer in exchange for labor, typically measured per hour or piece of work done.

Diminishing Marginal Product

The decrease in the output of an additional unit of input when all other inputs are held constant beyond a certain point.