All Things Being Equal, If a Firm Finds the Demand

question 91

Multiple Choice

All things being equal, if a firm finds the demand for one of its products is inelastic, it can increase its total revenues by

• A)raising its price.
• B)lowering its price.
• C)reducing fixed costs.
• D)reducing variable costs.
• E)reducing both fixed and variable costs.

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Definitions:

Behavioral Economics

A method of economic analysis that applies psychological insights into human behaviour to explain economic decision-making.

Self-Serving Bias

Self-serving bias is the tendency to attribute positive events to one's own character but attribute negative events to external factors, affecting judgment and decision-making.

Planning Fallacy

The optimistic cognitive bias that leads individuals or teams to underestimate the time, costs, and risks of future actions, while overestimating the benefits.

Overconfidence Effect

A cognitive bias where people overestimate their own abilities, knowledge, or predictions.