A shoe manufacturer wants to maximize its total revenue. When the manufacturer charges $25 per shoe, consumers demand 50 shoes per day. The manufacturer knows that the demand for shoes is highly elastic. In the given scenario, which of the following statements is true?
a. To maximize total revenue, the manufacturer should decrease the price of its shoes, because the percentage increase in quantity demanded will more than offset the decrease in price.
b. To maximize total revenue, the manufacturer should decrease the price of its shoes, because the percentage increase in quantity demanded will not offset the decrease in price.
c. To maximize total revenue, the manufacturer should increase the price of its shoes, because the increase in price will more than offset the decrease in quantity demanded.
d. To maximize total revenue, the manufacturer should increase the price of its shoes, because the increase in price will not offset the decrease in quantity demanded.
a
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If a firm needs one machine to produce a product, and must replace the machine when it wears out, then the firm should pick a durability level of the machine that
A) minimizes the expense today. B) minimizes the present discounted cost of having the machine forever. C) maximizes the future value of the machine. D) minimizes the future value of the machine.
Which of the following expenditures are not included in the consumption component of GDP?
What will be an ideal response?