Dominic sells pizza slices for $5 on the Santa Monica Pier. He currently sells 500 slices of pizza per day.This is a perfectly competitive business, and Dominic faces a perfectly price elastic demand curve. If he wants to try to increase daily revenues to $3,000, he should
A. raise the price of his pizza to $6 per slice and continue to sell 500 slices per day.
B. lower the price of his pizza to $4 per slice and try to sell 750 slices per day.
C. do nothing since he can do nothing to increase revenue.
D. keep the price at $5 per slice and produce 600 slices per day.
Answer: D
You might also like to view...
Advocates of steel tariffs to protect U.S. steel firms realize that when imposing such tariffs, the gains of firms are outweighed by the losses to consumers. This implies that
A) such advocates value producer surplus more than consumer surplus. B) such advocates want to help consumers. C) such advocates value consumer surplus more than producer surplus. D) such advocates value producer surplus and consumer surplus equally.
Broadly defined, competition involves:
A. private property and freedom of expression. B. independently acting buyers and sellers and freedom to enter or leave markets. C. increasing opportunity costs and diminishing marginal utility. D. capital goods and division of labor.