the producer of good x is contemplating a price change and has asked for your advice. after some empirical…

the producer of good x is contemplating a price change and has asked for your advice. after some empirical investigation, you conclude that the price elasticity of demand for good x is 0.75. your best advice to the producer would be to\nincrease the price of good x to raise total revenue.\ndecrease the price of good x to raise total revenue.\nleave the price of good x unchanged since it will not influence total revenue.\nincrease the price of good x to reduce total revenue.\n\nquestion 11\n2 pts\njoe is the owner - operator of joes haircuts unlimited. last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers. during the course of the year, he received three offers to work for other barbers, with the highest offer being $50,000 per year.\nwhat are joes accounting profits?\n$0\n$25,000\n$-25,000\n$40,000\n$75,000

the producer of good x is contemplating a price change and has asked for your advice. after some empirical investigation, you conclude that the price elasticity of demand for good x is 0.75. your best advice to the producer would be to\nincrease the price of good x to raise total revenue.\ndecrease the price of good x to raise total revenue.\nleave the price of good x unchanged since it will not influence total revenue.\nincrease the price of good x to reduce total revenue.\n\nquestion 11\n2 pts\njoe is the owner - operator of joes haircuts unlimited. last year he earned $200,000 in total revenues and paid $125,000 to his employees and suppliers. during the course of the year, he received three offers to work for other barbers, with the highest offer being $50,000 per year.\nwhat are joes accounting profits?\n$0\n$25,000\n$-25,000\n$40,000\n$75,000

Answer

Explanation:

Step1: Recall price - elasticity and revenue relationship

When price elasticity of demand ($E_d$) is less than 1 (inelastic demand), increasing price increases total revenue. Given $E_d = 0.75<1$, for good X, increasing price will raise total revenue.

Step2: Recall accounting - profit formula

Accounting profit = Total revenue - Explicit costs. Joe's total revenue is $200,000 and explicit costs (payment to employees and suppliers) are $125,000. Accounting profit=$200000 - 125000$.

Answer:

  1. increase the price of good X to raise total revenue.
  2. $75,000