Suppose the Price of a Good Is $5 and Quantity

question 29

Multiple Choice

Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What happened to total revenue and what does this indicate?

• A) Total revenue decreased from $54 to $50, indicating that demand is inelastic.
• B) Total revenue decreased from $54 to $50, indicating that demand is elastic.
• C) Total revenue increased from $50 to $54, indicating that demand is inelastic.
• D) Total revenue increased from $50 to $54, indicating that demand is elastic.

---

Definitions:

Deregulation

The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.

Regulatory Capture

A situation where regulatory agencies are dominated by the industries or interests they are charged with regulating, often leading to decision-making that benefits the industry at the expense of the public interest.

Regulatory Agency

An agency, commission, or board established by the federal government or a state government to control the prices charged and the services offered by a natural monopoly or public utility.

Rivalry

The characteristic displayed by certain goods and services that consumption by one person precludes consumption by others.