If Connecting U wants to MAXIMIZE its profits, what should they do? a) Connecting U should maintain their price at $16. Dropping the price would decrease their total revenue and profits. b)Connecting U should drop their price to $14.48. By dropping the price, they would increase their total revenue and profits.

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Chapter1: Making Economics Decisions
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If Connecting U wants to MAXIMIZE its profits, what should they do?

a) Connecting U should maintain their price at $16. Dropping the price would decrease their total revenue and profits.

b)Connecting U should drop their price to $14.48. By dropping the price, they would increase their total revenue and profits.

is the answer b?

 

Note- look at the info on the right-hand side of the pic 

Executive
Materials
Midpoint Formula
Connecting U Data
If we drop our price by 10 percent to $14.48
(according to the midpoint formula), our 10,000
customers will purchase 4 gigabytes of data (a
33.34 percent increase).
Connecting U Data
Connecting U
Executive
Oh, and our total monthly cost is $300,000.
Dropping our price and offering more gigabytes
of data will have no impact on our costs, as the
marginal cost of providing another gigabyte of
data is zero.
Quantity of Gigabytes per
Price per Gigabyte
Customer (per month)
Connecting U
$16.00
3
Executive
$14.48
4
Here is a summary of our data...
Connecting U
Executive
Joe, if Connecting U wants to maximize its
profits (the equivalent of maximizing revenue in
this case), what should they do?
• We have 10,000 customers who have the same demand for gigabytes of data as Jamming Joe.
• Our total monthly cost is $300,000.
Curious Cally
• Dropping our price and offering more gigabytes of data will have no impact on our costs, as the marginal cost of providing
another gigabyte of data is zero.
Connecting U should maintain their price at $16. Dropping the price
would decrease their total revenue and profits.
Connecting U should drop the price to $14.48. By dropping the price, they
will increase their total revenue and profits.
Transcribed Image Text:Executive Materials Midpoint Formula Connecting U Data If we drop our price by 10 percent to $14.48 (according to the midpoint formula), our 10,000 customers will purchase 4 gigabytes of data (a 33.34 percent increase). Connecting U Data Connecting U Executive Oh, and our total monthly cost is $300,000. Dropping our price and offering more gigabytes of data will have no impact on our costs, as the marginal cost of providing another gigabyte of data is zero. Quantity of Gigabytes per Price per Gigabyte Customer (per month) Connecting U $16.00 3 Executive $14.48 4 Here is a summary of our data... Connecting U Executive Joe, if Connecting U wants to maximize its profits (the equivalent of maximizing revenue in this case), what should they do? • We have 10,000 customers who have the same demand for gigabytes of data as Jamming Joe. • Our total monthly cost is $300,000. Curious Cally • Dropping our price and offering more gigabytes of data will have no impact on our costs, as the marginal cost of providing another gigabyte of data is zero. Connecting U should maintain their price at $16. Dropping the price would decrease their total revenue and profits. Connecting U should drop the price to $14.48. By dropping the price, they will increase their total revenue and profits.
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