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.
Answer: C
You might also like to view...
Refer to Figure 15-12. In the dynamic AD-AS model, if the economy is at point A in year 1 and is expected to go to point B in year 2, the Federal Reserve would most likely
A) increase the inflation rate. B) decrease interest rates. C) not change interest rates. D) increase interest rates.
If in market equilibrium the marginal social cost of producing a good exceeds the marginal private cost,
a. not enough of the product is being produced b. the price charged for the good is too high c. the good produces a positive externality d. the good produces a negative externality e. the government should produce the good