Assume That the Price Elasticity of Demand Is -2 for a Certain

question 153

Multiple Choice

Assume that the price elasticity of demand is -2 for a certain firm's product.If the firm raises price, the firm's managers can expect total revenue to:

• A)Decrease
• B)Increase
• C)Remain constant
• D)Either increase or remain constant depending upon the size of the price increase.

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Definitions:

Net Present Value Analysis

A method used to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows over time.

Capital Investment

Funds invested in a business or project for the purpose of furthering its objectives, typically involving the purchase of physical assets.

Cash Payback Period

The period of time required for the cash inflows from a project or investment to repay the initial cash outlay.

Estimated Life

The expected duration over which an asset is likely to be operational and useful.