What happens to total revenue given a price increase and demand is inelastic? Why?
Total revenue will rise if the price rises and demand is inelastic. This is because the percentage increase in the price exceeds the percentage decrease in the quantity demanded. Indeed, whenever, the demand is inelastic this means buyers are relatively unresponsive to a change in the price. Therefore, total revenue rises when price rises.
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Henry, a perfectly competitive lime grower in Southern California, notices that the market price of limes is greater than his marginal cost. What should Henry do?
A) expand his output to increase profits B) shut down and incur a loss equal to his total fixed cost C) advertise his limes to be able to sell more output D) look for the output level where marginal revenue minus marginal cost is maximized E) shut down and earn no profit but also incur no loss
Predatory pricing, as defined in the text, is
A) common and profitable but illegal. B) common, profitable, and legal. C) common but both unprofitable and illegal. D) common and legal but unprofitable. E) rarely observed though often alleged.
Tolls for government turnpikes have features of a tax based on _____
a. the benefit principle b. the ability-to-pay principle c. the Ramsey rule d. redistribution
Individual supply curves are summed vertically to obtain the market supply curve
a. True b. False Indicate whether the statement is true or false