A firm is currently producing in the inelastic portion of its demand curve. What course of action should you recommend to this firm?
◦ Reduce price, because if demand is inelastic and price is reduced, total revenue will increase.
◦ Continue selling at the same price, but increase the number of units it produces.
◦ Increase price, because if demand is inelastic and price is increased, total revenue will increase.
◦ Continue producing at the current output level, because the firm will maximise its total revenue by producing in the inelastic portion of its demand curve.