A Firm Derives Revenue from Two Sources: Goods X and Y.Annual

question 81

Multiple Choice

A firm derives revenue from two sources: goods X and Y.Annual revenues from good X and Y are $10,000 and $20,000,respectively.If the price elasticity of demand for good X is −4.0 and the cross-price elasticity of demand between Y and X is 2.0,then a 2 percent decrease in the price of X will:

• A) increase total revenues from X and Y by $520.
• B) decrease total revenues from X and Y by $200.
• C) leave total revenues from X and Y unchanged.
• D) decrease total revenues for X and Y by $600.

---

Definitions:

Perpetual Inventory System

An accounting system that records inventory transactions in real time, immediately affecting the inventory account with each purchase or sale.

Gross Method

An accounting method for recording purchases of inventory with no immediate recognition of discounts; discounts taken are recorded as income.

Merchandise

Goods that are bought and sold in the course of business, typically in a retail or wholesale setting.

Perpetual Inventory System

This method of accounting instantly documents inventory sales or purchases through computerized point-of-sale systems along with enterprise asset management software.