Use the Following to Answer Question(s): Demand, Elasticity, and Total

question 104

Multiple Choice

Use the following to answer question(s) : Demand, Elasticity, and Total Revenue

-(Exhibit: Demand, Elasticity, and Total Revenue) If price is higher than P, a decrease in price (but not below P) will result in:

• A) an increase in TR.
• B) a decrease in TR.
• C) no change in TR.
• D) none of the above, necessarily; it depends on the quantity sold.

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Definitions:

Fixed Costs

Costs that do not change with the level of output produced by a firm, such as rent and salaries.

Variable Costs

Expenses that change in proportion to the production output or sales volume of a company.

AVC

Average Variable Cost, calculated by dividing the total variable costs by the quantity of output produced.

AFC

Average Fixed Costs, which represent the fixed costs per unit of output, calculated by dividing total fixed costs by the number of units produced.