{"id":46467,"date":"2024-04-15T22:12:46","date_gmt":"2024-04-15T22:12:46","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=46467"},"modified":"2024-04-15T22:12:46","modified_gmt":"2024-04-15T22:12:46","slug":"a-firm-learns-that-the-own-price-elasticity-of-a-product-it-manufacturers-is-3-5-what-is-the-correct-action-for-the-firm-to-take-to-raise-its-total-revenue","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/a-firm-learns-that-the-own-price-elasticity-of-a-product-it-manufacturers-is-3-5-what-is-the-correct-action-for-the-firm-to-take-to-raise-its-total-revenue\/","title":{"rendered":"A firm learns that the own-price elasticity of a product it manufacturers is 3.5. What is the correct action for the firm to take to raise its total revenue?"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a9817e27717a\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"true\">\r\n                    Raises the price because the demand for the good is elastic                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    Lowers the price because the demand for the good is elastic                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    We need information on the firm&#039;s cost structure to answer                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    Raise the price because demand is elastic                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: <strong>A. Raises the price because the demand for the good is elastic.<\/strong><\/p>\n<p>The own-price elasticity of demand is a measure of how responsive consumers are to changes in the price of a good. A good with an elastic demand is one where consumers are very responsive to changes in price, meaning that a small change in price will lead to a large change in quantity demanded. A good with an inelastic demand is one where consumers are not very responsive to changes in price, meaning that a large change in price will lead to a small change in quantity demanded.<\/p>\n<p>In this case, the firm learns that the own-price elasticity of demand for its product is 3.5. This means that the demand for its product is elastic, and that consumers are very responsive to changes in price. Therefore, the firm can raise its price and still expect to increase its total revenue.<\/p>\n<p>Here is a more detailed explanation of each option:<\/p>\n<ul>\n<li>Option A: Raises the price because the demand for the good is elastic. This is the correct answer, as explained above.<\/li>\n<li>Option B: Lowers the price because the demand for the good is elastic. This is incorrect, as a firm with an elastic demand should raise its price, not lower it.<\/li>\n<li>Option C: We need information on the firm&#8217;s cost structure to answer. This is incorrect, as the firm&#8217;s cost structure is not relevant to <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n          <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div>           <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> the decision of whether to raise or lower the price.<\/li>\n<li>Option D: Raise the price because demand is elastic. This is incorrect, as the firm should raise its price, not lower it.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A firm learns that the own-price elasticity of a product it manufacturers is 3.5. 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