For a firm facing a downward-sloping demand curve, total revenue is usually maximized at the quantity where demand is:
Correct answer: B. Unit elastic
- A. Perfectly inelastic
- B. Unit elastic
- C. Perfectly elastic
- D. Equal to marginal cost
Explanation
Total revenue reaches its maximum where the absolute value of price elasticity of demand is one. When demand is elastic, a price reduction raises total revenue, while in the inelastic range it lowers total revenue.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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