Win-Win. According to an economic consultant, "For your firm, an increase in price is a win-win situation. Your total revenue will increase and your total cost will decrease. Therefore, you'll earn more profit (equal to Total Revenue - Total Cost)."
a. The consultant is assuming that demand is $\boxed{A}$
b. Concerning the cost effect of a price hike, what is the consultant assuming about your firm and its customers?
A. The price increase will stimulate demand and lower average cost as a result of economies of scale.
B. The demand curve is horizontal so a price increase will raise output, lowering average cost.
C. The demand curve is downward sloping so a price increase will raise output, lowering average cost.
D. The demand curve is downward sloping so a price increase will lower output, thus lowering total cost.