If a firm facing a linear demand curve experiences an increase in total revenue after lowering the price,
A. the initial price was set at a point where the demand is inelastic.
B. the initial price was set at a point where the demand is elastic.
C. the new price is set where the demand is perfectly elastic.
D. the new price is set where the demand is perfectly inelastic.
Answer: B
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If taxpayers can enjoy mosquito abatement whether or not they pay for it and, therefore, they tend to understate their true valuation of the spraying, this is an example of
a. private goods b. the median-voter model c. an open-access good d. the free-rider problem e. irrational ignorance
Gross domestic product (GDP) includes
The calculators of a price index use a “bundle” or “basket” of representative goods and services. What tradeoff are they making in this calculation?
a. ethics for monetary gain b. logic for relevance c. accuracy for convenience d. tradition for innovation
Which of the following is a reason to study economics?
A. Economic analysis explains daily events. B. It helps us understand why people, firms and government behave in a certain way. C. We need to understand relevant economic applications and policy issues. D. It provides useful logic for solving complex problems. E. All of these