The market for laundry detergents in a country has several players, each with a slightly differentiated product. Squeaky Clean Inc., produces and sells 20,000 tons of household laundry detergent in this market at a price of $4 per pack. Alex Dawson, the operations manager of the firm, thinks that a 50 - cent increase in the price per pack of the laundry detergent will increase the firm's profits. The marketing manager, Rick Arnold, however feels that an increase in price will adversely affect the demand for its product and profits will actually decline. Which of the following, if true, will strengthen Rick's argument? A. At the current output level, Squeaky Clean's additional revenue from the sale of an extra unit equals the additional cost of producing it. B. Squeaky Clean's laundry detergents are mainly consumed by households in the high-income group. C. The price of all grades of soda ash, a crucial raw material for detergents, has increased. D. As per the recent financial reports, Squeaky Clean's revenue has increased by only 10 percent compared to the previous year. E. Consumers of Squeaky Clean's detergents are not very responsive to price changes.
The market for laundry detergents in a country has several players, each with a slightly differentiated product. Squeaky Clean Inc., produces and sells 20,000 tons of household laundry detergent in this market at a price of $4 per pack. Alex Dawson, the operations manager of the firm, thinks that a 50 - cent increase in the price per pack of the laundry detergent will increase the firm's profits. The marketing manager, Rick Arnold, however feels that an increase in price will adversely affect the demand for its product and profits will actually decline. Which of the following, if true, will strengthen Rick's argument? A. At the current output level, Squeaky Clean's additional revenue from the sale of an extra unit equals the additional cost of producing it. B. Squeaky Clean's laundry detergents are mainly consumed by households in the high-income group. C. The price of all grades of soda ash, a crucial raw material for detergents, has increased. D. As per the recent financial reports, Squeaky Clean's revenue has increased by only 10 percent compared to the previous year. E. Consumers of Squeaky Clean's detergents are not very responsive to price changes.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The market for laundry detergents in a country has several players, each with a slightly
differentiated product. Squeaky Clean Inc., produces and sells 20,000 tons of household laundry
detergent in this market at a price of $4 per pack. Alex Dawson, the operations manager of the
firm, thinks that a 50 - cent increase in the price per pack of the laundry detergent will increase
the firm's profits. The marketing manager, Rick Arnold, however feels that an increase in price
will adversely affect the demand for its product and profits will actually decline.
Which of the following, if true, will strengthen Rick's argument?
A.
At the current output level, Squeaky Clean's additional revenue from the sale of an extra unit
equals the additional cost of producing it.
B.
Squeaky Clean's laundry detergents are mainly consumed by households in the high-income
group.
C.
The price of all grades of soda ash, a crucial raw material for detergents, has increased.
D.
As per the recent financial reports, Squeaky Clean's revenue has increased by only 10 percent
compared to the previous year.
E.
Consumers of Squeaky Clean's detergents are not very responsive to price changes.
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