When firms set prices by adding a fixed percentage markup to marginal costs, they are likely
A) concerned with the rate of profit rather than its net amount.
B) earning a satisfactory rather than a maximum profit.
C) exploiting their customers.
D) poorly managed.
E) searching for the most advantageous prices to set on the basis of limited information.
E
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Normal goods are those for which demand decreases as
A) the price of a complement falls. B) the price of a substitute falls. C) income decreases. D) the good's own price rises.
According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates
"We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. Source: Jesse Drucker, "In Times of Belt-Tightening, We Seek Reasonable Rates," Wall Street Journal, April 6, 2001. Based on the information above, the demand for hotel rooms is A) perfectly elastic. B) inelastic. C) unit elastic. D) elastic.