Assume the Price Elasticity of Demand for MC Pretzel Co

question 15

Multiple Choice

Assume the price elasticity of demand for MC Pretzel Co.pretzels is 0.8.If the company increases the price of each bag of pretzels,total revenue will

• A)Decrease because fewer bags will be sold.
• B)Increase because demand is elastic and revenue will rise.
• C)Increase because the percentage increase in price is greater than the percentage change in quantity demanded.
• D)Be impossible to predict because the percentage change in price is not known.

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Definitions:

Merged

The process of combining two or more entities into one, typically referring to businesses or corporations uniting to form a single new entity.

Herfindahl Index

An assessment of how large companies are in proportion to their industry, serving as a sign of competitive dynamics.

Market Shares

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales in an industry.

Four-Firm Concentration Ratio

An economic indicator that measures the combined market share of the top four firms in an industry, used to assess the level of competition.