During its run on Broadway, the play The Producers regularly sold out all available tickets at the St. James Theater. The theater could have raised ticket prices from $75 to $125 and still sold all available tickets but chose not to do so. The best explanation for this decision is
A) theater owners are unaware of the elasticity of demand for Broadway shows.
B) theater owners do not want to raise their tickets on weekends, when demand is high, and then have to lower prices during the week, when demand is lower.
C) firms sometimes give up profits in the short run to keep their customers happy and increase their profits in the long run.
D) theater owners are not motivated to maximize their profits.

Question

Quizplus · Accepted Answer

Firms sometimes give up profits in the short run to keep their customers happy and increase their profits in the long run. In this case, the theater owners may have believed that raising prices would upset their loyal customers and reduce demand in the long run. By keeping prices steady, they may have retained their customer base and benefited from repeat business and positive word-of-mouth.

During Its Run on Broadway, the Play the Producers Regularly