Meson Production Is a Price-Taker

question 42

Multiple Choice

Meson Production is a price-taker. It produces large spools of electrical wire in a highly competitive market, so it practices target pricing. The current market price of the electric wire is $800 per unit. The company has $3,000,000 in assets and its shareholders expect a return of 6% on assets. The company provides the following information: If fixed costs cannot be reduced, how much reduction in variable costs will be needed to achieve the profit target?

• A)$180,000
• B)$12,000,000
• C)$2,180,000
• D)$4,200,000

Understand the concepts of perfectly elastic and perfectly inelastic demand.

Grasp how changes in price influence total revenue depending on the elasticity of demand.

Identify factors that affect the elasticity of demand, including time and availability of substitutes.

Understand the impact of elasticity on business and economic decisions, including pricing strategies and revenue considerations.

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