During Its Run on Broadway, the Play the Producers Regularly

question 157

Multiple Choice

During its run on Broadway, the play The Producers regularly sold out all available tickets at the St.James Theater.The theater could have raised ticket prices from $75 to $125 and still sold all available tickets but chose not to do so.The best explanation for this decision is

• A)theater owners are unaware of the elasticity of demand for Broadway shows.
• B)theater owners do not want to raise their prices on weekends, when demand is high, and then have to lower prices during the week, when demand is lower.
• C)firms sometimes give up profits in the short run to keep their customers happy and increase their profits in the long run.
• D)theater owners are not motivated to maximize their profits.

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Definitions:

Perfect Competition

A market structure characterized by a large number of small firms, a homogeneous product, perfect information, and free entry and exit, leading to price-taking behavior.

Long-Run Equilibrium

A state in which all firms in a market are earning normal profits, and there is no incentive for firms to enter or exit the market.

Marginal Cost

Marginal cost is the additional cost incurred by producing one additional unit of a good or service.

Celebrity Spokesperson

A famous individual who is paid to use their fame to help promote a product or service.