When the Price of Peanut Butter Rises by 4 Percent

question 99

Multiple Choice

When the price of peanut butter rises by 4 percent, total revenue decreases by 8 percent. The demand for peanut butter

• A)is elastic.
• B)is inelastic.
• C)is unit elastic.
• D)has a price elasticity equal to 1/2.
• E)has a price elasticity equal to 2.

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Definitions:

Long Run

A period in economics in which all factors of production and costs are variable, allowing for full adjustment to changes.

Total Revenue

Total revenue is the total income generated by a company from its sales of goods or services before any expenses are subtracted.

Total Cost

The sum of all costs incurred in the production of goods or services, including both fixed and variable costs.

Profit-Maximizing

A strategy where a firm adjusts its production and pricing to achieve the highest possible profit.