Refer to the graph above and assume that the areas of the boxes are the same. Consider a situation where price decreases from P2 to P1. In this price range, demand is relatively:
A. inelastic because the gain in total revenue (area J) is less than the loss in total revenue (areas C + F + H).
B. inelastic because the loss in total revenue (areas D + G + I + J) is greater than the gain in total revenue (areas C + F + H).
C. elastic because the loss in total revenue (areas C + F + H) is greater than the gain in total revenue (area J).
D. elastic because the loss in total revenue (area J) is less than the gain in total revenue (areas C + F + H).
Answer: A
You might also like to view...
When a firm is experiencing diminishing marginal returns, marginal cost is
a. rising b. falling c. constant d. rising at first, then falling e. zero
A good's marginal social cost is defined as its
a. marginal private cost minus the value of any detrimental externality. b. incidental cost. c. marginal private cost plus the value of any taxes paid on its production. d. marginal private cost plus its incidental cost.
LAPD needs to increase the size of its police force, and it will cost them $100,000 per year to recruit two full-time officers. The LAPD should ask the mayor to: a. impose an extra charge on citizens who require extra police protection. b. keep the current force and provide less security
c. hire a private firm to provide extra security. d. increase the tax paid by citizens.
The theory of consumer choice illustrates the
a. importance of property rights in creating efficient markets. b. ability of a single economic actor to have a substantial influence on market prices. c. the trade-offs that people face in their role as purchasers. d. All of the above are correct.