If the Price of a Product Decreases by 10 Percent

question 70

Multiple Choice

If the price of a product decreases by 10 percent and the quantity demanded increases by 5 percent, then

• A) the producer should lower the price further to sell more and further increase total revenue.
• B) the producer should raise the price, but not as high as it was, to increase total revenue.
• C) the producer should raise the price higher than where it was to experience higher total revenue.
• D) total revenue will not be affected by price changes.
• E) the producer should change the price back to where it was before the change.

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Definitions:

Managed Floating

An exchange rate system where a country's currency value is allowed to fluctuate in response to foreign-exchange market mechanisms, but the central bank can intervene to prevent extreme fluctuations.

Bretton Woods System

A monetary management system established post-World War II, which set up rules for commercial and financial relations among major industrial states.

Pegged Exchange Rates

A fixed exchange rate system where a country's currency value is fixed or pegged to another currency, a basket of currencies, or another measure of value.