If the Absolute Value of the Price Elasticity of Demand

question 52

Multiple Choice

If the absolute value of the price elasticity of demand is less than 1, then:

• A) an increase in price decreases total revenue
• B) an increase in price has no affect total revenue.
• C) a decrease in price lowers total revenue.
• D) a decrease in price raises total revenue.
• E) a change in price has no affect on total revenue.

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Definitions:

Entry of Firms

This term refers to the process by which new businesses enter into an industry, contributing to competition and potentially influencing market dynamics.

Price Leadership

A pricing strategy where one dominant firm in an industry sets the price for products or services, and other firms in the market follow suit.

Average Total Cost

The total cost of production divided by the number of units produced, reflecting the cost per unit.

Search Cost

The time, effort, and financial expense incurred by consumers or firms in looking for information or resources, goods, and services.