The manager is seeking to maximize profit. Based on the current price of $550 per surfboard,...
The manager is seeking to maximize profit. Based on the current price of $550 per surfboard, which of the following is true?
- She should increase the price of surfboards, and expect a decrease in sales and an increase in profit.
b. She should decrease the price of surfboards, and expect an increase in sales and an increase in profit.
c. She should leave the price as it is, since this is the profit-maximizing price.
d. She should stop selling surfboards, since they are creating a loss.
e. She should increase the price of surfboards, and expect an increase in sales, a decrease in total cost, and an increase in profit.
Homework Answers
Option B.She should decrease the price of surfboards, and expect an increase in sales and an increase in profit.
The demand for surfboards is relatively elastic. As the price of surfboards declines, the demand will increase which will lead to increase in total revenue because increase in quantity demanded is more than the increase in price and thus in order to maximize profits, price should be decreased.
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