Question

A firm faces a demand function D(p), for which the revenue-maximizing price is $16. The demand function is altered to 2D(p). What is the new revenue-maximizing price?

a.    $8

    b.    $16

    c.    $32

    d.    There is insufficient information to determine this.

    e.    none of the above.

please explain

Answer 1

Answer:

A firm faces a demand function D(p), for which the revenue-maximizing price is $16. The demand function is altered to 2D(p). The revenue-maximizing price is the cost at which a business will make the most revenue for a given item

In order to find the price that will maximize revenue, a business must either experiment with a variety of pricing strategies to see which works the best, or have a precise understanding of the demand curve of the product it is selling.

The new revenue-maximizing price = 2D(p) = 2 * revenue-maximizing price = 2 * 16 = 32

C] $32 is the correct answer.