Question

# A firm faces a demand function D(p), for which the revenue-maximizing price is \$16. The demand...

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.

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.

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