Because of an increase in the price of leather, the average price of a pair of w

Question

Because of an increase in the price of leather, the average price of a pair of women's dress shoes increased by 12 percent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen? Total expenditure on women's dress shoes will decrease. Total revenue from the sale of women's dress shoes will decrease. The number of pairs of women's dress shoes they demand will decrease by 10.2 percent. none of the above A. B. C. D. A firm's average total cost is $80, its average variable cost is $75, and its output is 50 units. Its total fixed cost is A. less than $100. B. more than $300. C. between $100 and $200. D. between $200 and $300.

Explanation / Answer

1- now here we can see that the demand for the women shoes is inelastic this means that 12% increase in prices wont affect the demand by this much amount, thus total revenue will increase

as the shoes demanded will only be decreased by 12*0.85 = 10.2%

so answer is C

2- now total cost = average total cost* output = 4000

total variable cost = variable cost * output = 75*50 = 3750

so fixedcost = 4000-3750 = 250

so answer is D

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