Sunshine Foods is producing in the inelastic portion of its demand curve. How will the firm increase revenue Question 15Answer a.   Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve.   b.   Increase price, because if it increases price and demand is inelastic, total revenue will increase.   c.   Reduce price, because if it reduces price and demand is inelastic, total revenue will increase.   d. Continue selling at the same price, but increase the amount it produces.

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter6: Elasticities
Section: Chapter Questions
Problem 13P: A movie production company faces a linear demand curve for its film, and it seeks to maximize total...
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Sunshine Foods is producing in the inelastic portion of its demand curve. How will the firm increase revenue

Question 15Answer

a.

 

Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve.


 

b.

 

Increase price, because if it increases price and demand is inelastic, total revenue will increase.


 

c.

 

Reduce price, because if it reduces price and demand is inelastic, total revenue will increase.


 

d.

Continue selling at the same price, but increase the amount it produces. 

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