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Lisa is a self-employed dance instructor. She has tried to modestly raise her lesson rates three times over the past five years, most recently about two years ago. However, every time she did so, she was forced to lower the increased rates back to their original levels, due to the fact that each time she lost enough students to make the rate increase unprofitable. Although Lisa would like to raise her rates and earn more money, at the moment she has resigned herself to staying with her current rates, in order to avoid the process of losing students and having to rebuild her client base once again.

What assumption underlies Lisa's conclusion that she should not try to raise her lesson rates again at the present moment?


Lisa's current students have the same demographic makeup as her previous students and would be equally likely to switch teachers if she raised lesson rates again today.


Economic conditions were poor two years ago and continue to be poor today. Hence, Lisa should not attempt to increase her rates.


Lisa is not as qualified as other private dance instructors, and if she wants to increase her rates, she will need to undergo additional training to make her services more valuable to her clients.


Lisa previously tried to increase her lesson rates above prevailing market rates, leading to an increased likelihood of failure, as her students left her for more reasonably priced teachers in a competitive industry.


Private dance lessons are not an economic necessity and are one of the first things that people drop during a recession or other time of economic hardship.

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